The finance ministry on Thursday set up a committee under finance secretary T.V. Somanathan to review the pension system for government employees.

The panel would suggest whether in the light of the existing framework and structure of the National Pension System (NPS), as applicable to government staff, any changes therein are warranted.

As per its terms of reference, the committee would suggest measures to modify the same with a view to improving upon the pensionary benefits of government staff covered under the NPS, keeping in view the fiscal implications and impact on overall budgetary space, so that fiscal prudence is maintained to protect the common citizens.

The committee, to be chaired by Somanathan, would have secretary in the department of personnel and training (DoPT), special secretary in the department of expenditure and chairman of the Pension Fund Regulatory and Development authority (PFRDA) as members.

Last month, finance minister Nirmala Sitharaman said that a finance secretary-chaired committee would look into the issue of pensions under the NPS for government employees and evolve an approach which addresses the needs of employees while maintaining fiscal prudence.

The announcement came in the backdrop of several non-BJP states deciding to revert to the DA-linked Old Pension Scheme (OPS) and also employee organisations in some other states raising demand for the same.

The state governments of Rajasthan, Chhattisgarh, Jharkhand, Punjab and Himachal Pradesh have informed the Centre about their decision to revert to the old pension scheme and have requested a refund of the corpus accumulated under the NPS.

Last month, the finance ministry informed Parliament that it is not considering any proposal to restore the OPS in respect of the central government employees recruited after January 1, 2004. Under the OPS, retired government employees received 50 per cent of their last drawn salary as monthly pensions. The amount keeps increasing with the hike in the DA rates.