
Government employees across India have been protesting against the implementation of the National Pension Scheme (NPS) and are demanding the restoration of the old pension scheme (OPS). These protests have been ongoing since September 2023, with the most recent unrest occurring in Assam last week, where employees staged demonstrations in front of several offices.
In November 2023, thousands of employees and pensioners from both the Union government and state governments gathered at Ramlila Maidan in Delhi to demand the reinstatement of the OPS. They threatened to go on an indefinite strike if their demand was not met, marking the fourth such rally in the capital on this issue.
Concerns of Government Employees
Government employees who joined service after January 2004 are worried about their post-retirement future under the NPS. They have expressed discontentment with the 10 percent deduction from their monthly salaries as a contribution towards the pension fund under the NPS. Employees claim that the central and state governments do not have accurate records of the number of employees, leading to cases where the government has failed to match its contribution to an employee’s retirement fund. Additionally, the NPS does not provide dearness relief, which is applicable under the OPS.
Under the OPS, employees are guaranteed a monthly pension equivalent to 50 percent of their last drawn basic salary, along with a dearness allowance upon retirement or an average of the wages earned in the previous 10 months, whichever is more favorable. To qualify for these benefits, employees must have completed 10 years of service, and no employee contribution is required for this scheme.
State-wise Implementation of Pension Schemes
While the OPS has been largely discontinued, several states such as Rajasthan, Chhattisgarh, Jharkhand, Punjab, and Himachal Pradesh have announced their intention to bring back the OPS. West Bengal, on the other hand, never implemented the NPS.
Comparison of NPS and OPS
The NPS is a defined contribution pension scheme where employees contribute 10 percent of their basic salary plus dearness allowance, matched by a 14 percent contribution from the government. The money is then invested in pension funds approved by the Pension Fund Regulatory and Development Authority, and returns are market-linked. On maturity, 60 percent of the corpus is tax-free, while the remaining 40 percent is taxable when invested in annuities.
In contrast, the OPS is a defined benefit pension scheme that guarantees a lifelong stable income in the form of a monthly pension, with no deductions from the salary of government employees. It also provides the benefit of no tax on pension income. However, the OPS is limited to government employees, while the NPS is available to all citizens and provides benefits to private sector salary earners as well.
Financial Implications and Concerns
The argument against the OPS is that as the payout burden keeps rising, states will have to allocate more funds to pensions, leaving less for capital expenditure and other development efforts. According to the Reserve Bank of India (RBI), if all state governments revert to the OPS from the NPS, the cumulative fiscal burden could be as high as 4.5 times that of the NPS, with an additional burden reaching 0.9 percent of GDP annually by 2060.
The RBI also highlighted that the last government employees hired before 2004 will retire by the early 2040s and will draw pension under the OPS until the 2060s, which could significantly burden the state’s finances and restrict their capacity for growth-enhancing capital expenditures.
In conclusion, government employees in India are protesting against the implementation of the NPS and demanding the restoration of the OPS. While the NPS provides benefits to all citizens, the OPS offers a stable income with no deductions from the salary of government employees. However, the financial implications of reverting to the OPS are a concern for the government.
Old pension scheme should be govt burden is always there. It is a social obligations. Pension is considered as a payment of deferred wages. Whatever it be the govt should consider
The employees should also fight against corruption etc
OPS should never be introduced for any Govt. Officials since it will create a fiscal deficit in such a manner than India will soon become another Venezuela. NPS is the only solution to address the Pension issue.