Old Pension Scheme: Ray Of Hope From Rajasthan, But A Long Way Ahead

“The NPS is like a leukaemia (a type of cancer) in the whole system. From an IAS officer to a peon, it affects everyone. There are instances where an employee has served a department for three decades as a daily wager and was regularised just a year or two before retirement, going by NPS, they don’t even get a monthly pension of rupees 700,” said Fayaz Ahmed who is a member of All India United Front for Pension Restoration (AIUFPR).

Under the NPS scheme, the government has mandated a deduction of 10 per cent of the basic salary of an employee while it contributes 14 per cent itself towards a corpus. Of the corpus accumulated through the whole working period, only 60 per cent can be withdrawn directly by the employee and that too only after the retirement. The 40 per cent must be used for buying a pension plan from the government enlisted companies which may sustain for 10 to 15 years after retirement.

In the old pension scheme, which many state governments said increased a liability on them, a retiring employee would get half of basic salary in addition to the dearness allowance (a pension component that increases with inflation) as the pension. For this, one had to complete at least 10 years of government service before retirement. For those choosing VRS or voluntary retirement from service, 20 years were minimum working period to be eligible for pension.

“An employee can fall ill. There can hundreds of emergencies where one may need large sums of money at a time. NPS does not even let you withdraw your own money,” Ahmed told India Ahead.

Manjeet Singh Patel who is the president of National Movement for Old Pension Scheme told India Ahead that there are multiple lacunae in this policy and even the state governments willing to move out of the NPS may have a tough time.

All union territories and states except West Bengal are a part of the NPS right now. While Rajasthan has batted to move out of the NPS, Akhilesh Yadav in Uttar Pradesh has also pitched his voters to do away with it, if he comes to power.

“Earlier the contribution from government was 10 per cent which was increased to 14 in 2019 after a lot of protests by us. But that does not solve the problem. The 85 per cent of this money is put by them in government securities while rest 15 goes into the open market like equities. Now see, the markets have been in a bad state for 2 years and (with Russia-

Ukraine crisis going on), they have plunged further. Amid all this, our money is unwillingly been gambled upon because government is investing it in the same market,” Patel said.

He added that one of the biggest flaws in NPS was that in many states like Uttar Pradesh, few government job vacancies don’t have an age limit, and, also many employees are regularised at an age of 50 to 55. They ideally get only five years to contribute towards NPS.

“The worst being even after induction in service or post regularisation in their 50’s, the government in Uttar Pradesh did not deduct their 10 per cent of basic salary neither contributed their own 14 per cent towards the corpus. So, they neither got a corpus nor a pension plan,” Patel said adding the number of such employees is also huge.

He added that for many employees, who would occupy good positions and got, say a salary of one lac rupees a month, their pension as per NPS would not amount more than ten thousand rupees even if they serve a decade.

Also, under the NPS, Patel says that the kin of the employees who died in service have suffered due to absence of the gratuity and family pension. It was after five years after introduction of NPS that union government woke up and allotted family pension to kin of the deceased.

“But this too had a condition. The whole money that accumulated in corpus was taken away from the family by the government, only then, they could get the family pension,” Patel said.

He added that to rectify this, government took more than a decade and after many writ petitions, in 2021, it announced that only government’s contribution in the corpus will be taken back.

“The problem becomes more severe for the junior level employees. While the senior ones drawing salary of over a lac can get a pension of upto rupees 10,000, the ones with a salary to 30 to 40 thousand barely get an amount that is sufficient to survive,” he said.

The Rajasthan government’s recent announcement may seem like a win for these struggling employees but there over 25 states including UTs that are signatories to NPS.

“State governments have signed 3 MoUs (memorandum of understanding) with central government over this and unless the Centre takes a step, it is very difficult for states to withdraw from this. More so, the money of employees to the tune of thousands of crores is right now in the open market which needs to be brought back before putting an end to this,” he said.

Patel advised what government can least begin with, is converting the share of employees in NPS corpus as a General Provident Fund and not invest it in open market. “By that manner we will be able to withdraw it any time and more so earn interest on it rather than losing it to market fluctuations. The government can however put their 14% share in the open market,” he said.

He added that government should let the employees decide what should happen with their earnings rather than dictating him. “If they trust their policies so much, let them put both options – guaranteed recurring pension or the NPS. Let employees decide what happens with their money,” Patel.

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