The Tamil Nadu government has proposed the Tamil Nadu Assured Pension Scheme (TAPS), a plan that largely restores the features of the Old Pension Scheme while introducing refinements intended to improve fiscal management and beneficiary protections.
Tamil Nadu Pension Scheme details and benefits
Under TAPS the pension calculation will be based on 50% of the pay drawn in the last month of service, matching a key element of the Old Pension Scheme (OPS). The scheme also secures family pension at 60% of the beneficiary’s pension and provides inflation indexation. A death-cum-retirement gratuity provision (DCRG) remains in place; where an employee dies in harness after 20 years of service, gratuity of up to 925 lakh will be paid.
TAPS differs from the Unified Pension Scheme (UPS) in several respects. Whereas UPS bases pension on the average of the last 12 months’ basic pay, TAPS uses the final drawn pay. On death of the pensioner, UPS restricts family payouts to the legally wedded spouse; TAPS broadens coverage to legal heirs nominated by the pensioner. The proposed scheme also guarantees a minimum assured payout regardless of length of qualifying service, unlike UPS which required at least ten years of service for the minimum benefit.
Officials say the scheme follows the broad framework of OPS except for the introduction of monthly individual contributions and the practice of revising pensions at the constitution of every pay commission. Legal amendments to pension rules are required before TAPS can be implemented, and the government has not yet set a firm commencement date.
One notable administrative change is the decision to invest pension accumulations with the Pension Fund Regulatory and Development Authority (PFRDA) instead of the Life Insurance Corporation (LIC). Until now, funds under the Contributory Pension Scheme (CPS)—which covers employees who joined government service on or after 1 April 2003—were invested in LIC’s Superannuation Fund. The Comptroller and Auditor General has previously criticised the State for not using PFRDA, noting lower returns when investments were placed with LIC and in treasury bills.
Approximately 6.24 lakh employees currently in the CPS are expected to be eligible to migrate to TAPS, though the government will allow staff to choose their preferred pension arrangement. Officials highlighted that projections of State Own Tax Revenue (SOTR) growth have been modelled conservatively for the next 15 years to ensure sustainability.
According to the CAG report for 2023-24, pensions and other retirement benefits accounted for about 22.5% of SOTR, with pension payments of 37,696.81 crore against SOTR of ,67,279 crore. The State has assumed a conservative SOTR growth rate of 8% in its projections and expects pension liabilities to stabilise at around 21 to 22% of SOTR.
Policymakers said sufficient precautions have been taken during design and that the model is expected to be viable. With the move to PFRDA and the wider protections offered under TAPS, the government aims to balance improved retirement security for employees with prudent fiscal management.
Key Takeaways:
- Tamil Nadu launches the Tamil Nadu Pension Scheme (TAPS), closely mirroring the Old Pension Scheme (OPS) with improvements over the Unified Pension Scheme (UPS).
- TAPS guarantees 50% of last drawn pay as pension, 60% family pension, death-cum-retirement gratuity and inflation indexation.
- About 6.24 lakh current Contributory Pension Scheme employees may migrate; pension funds to be invested with PFRDA instead of LIC.
- State projects pension liabilities stabilising at roughly 21–22% of State Own Tax Revenue, based on conservative growth assumptions.
