Pension scheme is considered to be the most obliging service that a government could provide to its citizens. It’s also the scheme which was about to create a huge downfall of the Indian economy in the past decade. Around 6.9 million people benefited from the Old Pension scheme in the last decade, the sudden replacement of the Old Pension Scheme with the National Pension Scheme on 22nd December 2003 had gained a negative opinion among the citizens, but the action was a master plan.
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OLD PENSION SCHEME(OPS):
OPS was a popular scheme introduced all across the world in the 1990s. India’s OPS has the following features;
- 50% of the last drawn salary is considered to be the base and say 4% of the base is kept as a hike or Dearness allowance(DA) to compensate for inflation.
- The fund is directly provided from the government’s revenue.
The scheme doesn’t provide any returns since the capital is not an investment. Even though the government is in extremely poor financial condition it should provide the fund for the pensioners. The worst thing is that the pension amount provided to the retired people are provided by the revenue generated by the present workforce.
IMPACT OF OPS:
The stats displaying the percentage of revenue that had been spent for pension would prove to us the impact it would have created if continued.
- UP-36.49%
- BIHAR-58.9%
- HIMACHAL PRADESH-79.93%
If the state had continued to allocate the capital for pension in this manner it would have created a devastating impact on the State’s growth and it also would have run out of capital to provide pension for the pensioners. This situation would have given rise to higher dependency on Central government or increase in debt. This shows that OPS was a clear fiscal burden to the Indian economy.
NATIONAL PENSION SCHEME(NPS):
This scheme was introduced by Sir Vajpayyee in the year 2003.NPS has the following features;
- 10% of the current salary should be provided by the employee to the scheme and another 10% should be provided by the employer.
- The collected money is invested in Government bonds,Private bonds and Equities which would provide returns
- These investments are governed by agencies like LIC,TATA etc.
- After the retirement the beneficiary could get his pension(returns) on monthly basis
Unlike the OPS the expenditure of the government is very little thus it would not affect the growth of the State. It has been estimated that till the year 2022,NPS have generated the asset worth ₹7,94,870 Cr and there are around 59.78 lakh beneficiary from state government alone. The NPS is governed by Pension Fund Regulatory & Development Authority(PFDA).NPS had successfully created a Government Monitored Portfolio Management Service.
https://www.npstrust.org.in/content/what-nps
BRINGING BACK OPS:
Five states which includes Rajasthan, Chhattisgarh, Himachal Pradesh, Punjab and Jharkhand have assured to bring back the OPS.RBI has warned the states regarding this statement. Replacement of NPS with OPS would result in accumulation of liabilities which in turn affects the country’s economy. Since it would be hard for common people to understand its drawbacks and they were blind sighted regarding the direct benefits of OPS, political parties try to gather votes of common people.
Thus bringing back the OPS would surely create a devastating impact on the Indian Economy.
