In a judgment affecting millions of public and private sector employees, the Supreme Court on Tuesday upheld validity of the 1996 Government Pension Scheme providing for diverting a major part of employers' provident fund contribution to a central fund for payment of pension to employees after their superannuation.

Dismissing a batch of over 80 petitions filed by various employees unions challenging the Government Pension Scheme, a bench comprising Justice S Rajendra Babu and Justice K G Balakrishnan said, "We are upholding the validity of the scheme."

However, the court said it would examine separately matters pertaining to those organisations which had been exempted from participating in the Government Pension Scheme on the ground that they had a better pension scheme.

Almost all the employees unions across the country had challenged the government pension scheme on the ground that it was arbitrarily withholding money due to the employees after retirement on the pretext of paying pension.

The matter had been transferred to the apex court as the high courts had given conflicting judgments - some upholding the scheme while others staying the scheme.

The Employees Provident Fund and Miscellaneous Provisions (Amendment) Act, 1996 had brought into operation the employees pension scheme in which the prevailing family pension scheme was merged.

Under the scheme, though the employees contribution to the provident fund was not touched, major portion of the employers' contribution was to be diverted to the pensions
fund.

Under the 1996 Act, it was provided that of the total contribution of the employer, an amount equivalent to 8.33 per cent of the basic and dearness allowanace of the employee would be transferred every month to the central fund.

The monthly pension payable to the employee after retirement was to be computed on the basis of pensionable salary multiplied by pensionable service divided by 70.

As per the Government Pensions Scheme, the pensionable salary is calculated by taking the average salary drawn in the last 12 months of service before retirement.

Hence, if an employee puts in 35 years of service before retirement, he would be entitled to a pension equivalent to half of the monthly salary drawn in the last year of service.