Andhra Pradesh Government has notified the Andhra Guaranteed Pension Scheme Act on 20th October, 2023 after receipt of assent from the Governor. (Copy of Act is placed at the end of the Article).
Andhra Guaranteed Pension Scheme which is considered a best fusion of Old Pension Scheme and New Pension Scheme has become reality. It is generally expected that Centre will also propose changes in NPS on similar lines.
However, it appears that 100% of fund (Employee and Employer Contribution) needs to be invested in Annuity for getting 50% of Last Pay Drawn under GPS. This appears to be highly disadvantageous to the Employees as compared to the Old Pension Scheme where Employees were eligible to withdraw their contribution completely and Pension Cost was borne by the Government.
Purpose of the Act
An act to ensure financial security and welfare of the Government employees subscribed to the national Pension system by implementing a guaranteed pension System, while also ensuring fiscal sustainability and Inter- generational equity.
In this article, we will discuss Key Points Related to the Act
Applicability of the Act (Section 1)
It shall extend to all the employees, who are recruited on or after 1-9-2004 including all the tiers of all the Rural and Urban Local Bodies, Universities etc., and have opted to subscribe to the Andhra Pradesh Guaranteed Pension System.
Benefits of the Andhra Guarantee Pension Act (GPS Act)
Top-up amount to be provided by the Government to ensure a monthly Guaranteed Pension at the rate of fifty percent (50%) of the last drawn basic pay, in case of a shortfall in the annuity received by the retired APGPS subscriber.
Top-up amount to ensure a monthly spouse pension at the rate of sixty percent (60%) of the Guaranteed Pension, in case of a shortfall in the annuity received by the spouse of the deceased APGPS subscriber.
Cost of Living Adjustment on the last drawn basic pay as per inflation adjusted dearness relief, as per the rules notified under this Act.
Top-up amount to ensure a monthly minimum Guaranteed Pension of Rs. 10,000/- (Rupees ten thousand only) in case of short fall in the annuity received by the APGPS subscriber.
Providing a health care scheme for the retired APGPS subscribers.
Factors for Determination of Amount of Guaranteed Pension
Upon retirement of the employee, the purchase of the annuity plan from an Annuity Service Provider shall be made in accordance with the rules notified under this Act, duly utilizing the accumulated pension corpus in the individual pension account.
The Guaranteed Pension shall consist of the Annuity Component and the Top-up Component as specified below:
(a) The Annuity Component is the annuity receivable by the APGPS subscriber based on the annuity plan selected as explained above.
(b) Top-up Component is the amount receivable by the APGPS subscriber, if any, so that the Subscriber receives Guaranteed Pension as specified under this Act.
Calculation of Guaranteed Pension and the Top- up Component shall be as prescribed in the rules notified under this Act.
The part withdrawals and the final withdrawal made by the APGPS subscriber shall result in a proportional reduction in the Guaranteed Pension as prescribed in the rules notified under this Act.
(From above provision, it appears that 100% of fund (Employee and Employer Contribution) needs to be invested in Annuity for getting 50% of Last Pay Drawn. This appears to be highly disadvantageous to the Employees as compared to the Old Pension Scheme).
In this, it appears that at the time of Retirement, Employees will not be getting any fund/amount from their savings for Retirement Requirement.
However, how exactly it will operate, the same will be clarified by the Rules).
Eligibility for Andhra Guarantee Pension Act (GPS Act)
Rendering of a minimum of ten (10) years of qualifying service, if retiring on superannuation.
Rendering of a minimum of twenty (20) years of qualifying service, if retiring from service on voluntary retirement.
Rendering of a minimum of thirty three (33) years of qualifying service, if retired by the Government in the public interest.
Rendering of a minimum of ten (10) years of qualifying service, if retiring from service on Medical Invalidation.
Non- Eligibility for Andhra Guarantee Pension Act (GPS Act)
In following scenarios, Employees will not be eligible for AGPS:
Retired from service due to resignation;
Dismissal from service, removal from service and compulsory retirement arising from Disciplinary action.
If there are any Disciplinary or Judicial proceedings pending against the APGPS subscriber at the time of retirement, the benefits specified under Section 3 shall become payable only after conclusion of the Disciplinary / Judicial proceedings, as per the rules notified under this Act.
In case the APGPS subscriber dies while in service, the conferment of benefits shall be as prescribed under the rules.
Procedure to become Eligible for AGPS
The existing NPS subscribers shall exercise the option to subscribe to APGPS within the period as prescribed under the rules.
Employees, who join service after notification of this Act shall exercise the option to subscribe to the APGPS at the time of joining the service.
Subscribing to APGPS shall not affect in any way, the monthly contributions made to the NPS by the employees and the employer as per the relevant Rules and executive instructions
Provisions Regarding Family Pension
In the case of death of the retired APGPS subscriber, the spouse shall receive Spouse Pension at the rate of sixty percent (60%) of the Guaranteed Pension, consisting of the Annuity Component and the Top- up Component as specified below:
The Annuity Component is the annuity receivable by the spouse based on the annuity plan selected by the APGPS subscriber as per sub-section (1) of section 6 above.
Top-up Component is the amount receivable by the spouse, so that he/she receives the Spouse Pension as specified under this Act.
The process, procedure and conditions for determination, processing, sanction, authorization and disbursal of the Spouse Pension shall be governed by the prescribed rules.
Rules will also govern following aspects
(a) Conditions pertaining to reckoning of qualifying service;
(b) Conditions governing various retirement situations, including death, and the entitlements thereof;
(c) Conditions governing the purchase of annuity plan;
(d) Cessation of the Top-up Component;
(e) Employment after retirement;
(f) Top-up Component subject to future good conduct;
(g) Withholding or withdrawing Top-up Component;
(h) Grievance redress mechanism for APGPS subscribers.
Copy of the Andhra Guaranteed Pension Scheme (GPS) Act