By Mohd. Naushad Khan
The debate on Old Pension Scheme started when many states demanded to restore the Old Pension Scheme and roll back the National Pension System (NPS). Political parties are also taking keen interest in the issue and raising their voice for and against this scheme during their campaign trail in Gujarat.
Old Pension Scheme (OPS) entails 50% of the last basic salary drawn, along with other benefits like DA, as pension. New Pension Scheme (NPS) is a contribution-based pension scheme introduced by the Centre in January 2004. Under NPS, an employee contributes at least 10% of his pay, which is matched by the government contribution of 14%. The employee is allotted a Permanent Retirement Account Number. The fund then is invested by fund managers. After retirement, the employee can withdraw 60% of the corpus and the remaining 40% is paid to purchase an annuity or annual payment from a registered insurance firm.
The old pension plan will be reinstated in Rajasthan, starting with the upcoming fiscal year, and Chhattisgarh is anticipated to follow suit. In order to address the outdated pension plan, the governments of Kerala, Andhra Pradesh and Assam have also established committees. With effect from January 2004, the Central Government implemented the National Pension System (NPS) (except for armed forces). The Union Cabinet approved of improvements to the NPS in 2018-19 to benefit central government employees, who are covered by the programme, to streamline and improve it. The government started the NPS as a strategy to get rid of its pension responsibilities. An article in the news highlighted early 2000s studies that claimed that India’s pension debt was out of control.
After retirement, the Old Pension Scheme ensures a lifetime income. Typically, the promised sum is equal to 50% of the last wage received. The cost of the pension is covered by the government. The programme was abandoned in 2004. According to economists, the problem is straightforward: longer lifespans imply higher pension pay-outs. For instance, workers who retire at age 60 and have an expected lifespan of at least 80 years must be compensated for more than 20 years following superannuation.
The Central Civil Services (Pension) Rules, 1972 were changed in response to the establishment of NPS. Government employees, who participate in the NPS, can choose where to invest their money by making regular contributions to a pension account throughout the course of their careers. After retirement, people can utilise some of the pension money as a lump sum withdrawal and the remainder to purchase an annuity for a steady income. PFRDA (Pension Fund Regulatory and Development Authority) is the organisation in charge of implementing and overseeing NPS in the nation. All assets under the NPS are officially owned by the National Pension System Trust (NPST), which was established by PFRDA.
All Indian nationals, including NRIs, who are between the ages of 18 and 70 are eligible to join the NPS under the All Citizens Model. Employees contribute from their salaries to their pension corpus as part of a participation programme, and the government matches their contributions. The money is subsequently invested through Pension Fund Managers in specified investment plans. According to the Finance Ministry, Central Government personnel have the choice of Investment Pattern and Pension Funds (PFs) as of 2019. 40% of the corpus is invested in annuities, which is taxed, and the remaining 60% can be withdrawn tax-free upon retirement. Even private persons are eligible to join the programme.
Both the Congress and the Aam Aadmi Party have pledged to implement the demand for the restoration of the old pension scheme (OPS) if elected to power in Gujarat. With this pledge, the opposition parties want to win over the thousands of public servants who are protesting the Bharatiya Janata Party (BJP) administration against the new pension plan. The 182-member Gujarat Assembly will be chosen in two rounds of voting on December 1 and 5. For new hires who began their employment on or after April 1, 2005, the Gujarati government implemented a new contributing pension plan.
According to its statement, it will match 10% of the base pay plus dearness allowance (DA) that employees put to the NPS fund. With effect from April 1, 2019, the government will contribute 14% of the employee’s salary and deferred compensation under the Centre’s plan, compared to the employee’s 10% contribution. After employees protests in Gujarat, the state administration declared that the new pension would not apply to anyone who had started working before April 2005. Additionally, it pledged to increase its contribution to the fund from 10% to 14%.
The Congress’ election platform for Gujarat includes the implementation of the OPS. Those who assert that the OPS will burden the exchequer are mistaken, according to Rajasthan Chief Minister Ashok Gehlot, as it is all about financial management. If elected to power in the state, the AAP has promised to implement the OPS for the benefit of Gujarat’s public employees. The AAP government in Punjab quickly adopted it when the local cabinet approved of its restoration in order to support its argument.
In a recent statement, AAP national convener and Delhi chief minister Arvind Kejriwal alleged that the new pension plan was ‘unfair’ and demanded that the OPS be reinstated and applied nationwide. Additionally, he stated that the Punjab AAP government, led by Bhagwant Mann, had carried out the pledge. We will introduce OPS in Gujarat and Himachal Pradesh as well, Kejriwal had previously promised.