Punjab to roll out ‘guaranteed pension’ scheme, but employees will still contribute 10%

The Punjab government has said it will activate a 'guaranteed pension' scheme for its employees – one that resembles but is not the same as the Old Pension Scheme. In a notification on Sunday the state's Finance Department referred to an earlier announcement – on November 18, 2022, which made that 'guaranteed pension' promise – said it needed four months more to finalise and execute the new scheme.

Crucially, however, the ruling Aam Aadmi Party – which faces an Assembly election that will likely take place in February 2027 – said the nature of the proposed payout will continue to be that of a 'defined contributory pension scheme'.

That means the mandatory 10 per cent contribution from employees' side will continue, while the employer, i.e., the Punjab government, will pay the same. Therefore, unlike the traditional OPS – under which pension is a defined benefit without an employee contribution – Punjab’s proposed model will provide a guaranteed pension payout while still retaining the contributory structure.

A senior Finance Department staffer said the government is working out a way to link existing contributions to the proposed 'guaranteed' payout. The staffer, who declined to be named, said 'modalities for employee and state corpus, and payment methodology needs to be worked out..

We don't yet know how it will be done yet'. Shyam Lal, an employee leader said, “All these are delaying tactics. Why did they need to study the model now when the elections are around the corner?” The review exercise will also include a study of the central government's Unified Pension Scheme and those run by other state governments.

The committee entrusted with the review will then recommend if the proposed 'modified scheme' should be implemented or if Punjab should adopt any other pension model. All of this comes amid government employees protesting for the implementation of the old pension scheme, i.e., the OPS.

And the point about the election now roughly six months away is worth revisiting. That is because the Model Code of Conduct comes into force a month before voting and that doesn't leave the AAP with much time to study the report and make a decision if the committee takes four months.

But the same Finance Department staffer was confident the election schedule would have no bearing on the government's decision.