Demand for restoration of Old Pension Scheme
11 Aug 2023 5 mins Download PDF
Demand for restoration of Old Pension Scheme
Why in the News?
Thousands of Central govt. and Central PSU employees staged a protest rally in Delhi seeking for the restoration of the Old Pension Scheme.
The Old Pension Scheme:
- It is a retirement scheme approved by the central government that provides monthly pension to the beneficiaries till the end of their life service.
- The amount of pension released monthly shall be equal to half of the last drawn salary by an individual before retirement.
- Also called as Defined Contribution scheme.
- In addition to the Pension amount, the beneficiaries receive Dearness Allowance that is fixed on the basis of price rise/ inflation in the economy.
- The entire amount of the Old Pension was paid by the government.
- Only government employees are eligible to receive pension under the OPS after retirement.
New Pension Scheme (NPS):
- Under the new retirement scheme introduced in 2003, the beneficiaries can withdraw 60% of the amount invested after retirement.
- It seeks to provide old age income security in a fiscally sustainable manner and also make prudential investments in productive sectors of the economy by channelizing the small savings.
- The scheme was made mandatory for all new recruits to the Government service (except armed forces) with effect from January 1, 2004,
- The scheme has also been rolled out for all citizens (private sector employees) for adoption on voluntary basis with effect from May 1,2009.
- NPS is a contributory pension scheme under which employees contribute 10% of their salary (basic + dearness allowance). The government contributes 14% towards the employees’ NPS accounts.
- In NPS, employees contribute money from their salary during their employment tenure. The amount is invested in market-linked instruments.
Why there was a shift from OPS to NPS?
- The OPS was a financial burden to the government as it laid the burden of employees’ pensions on the states, risking their financial security.
For instance, Himachal Pradesh spends almost 80% for pensions as a percentage of the state’s own tax revenues.
- Employees retiring at 60 with an average span of 80 years of age will receive pension for 20 days, and after his/her death the spouse shall receive a portion of the pension which lays massive burden on the government.
- The NPS provided advantages of,
- The small savings channelization to investments in productive sectors is market-linked and promotes growth of the economy.
- It involves contribution from both employers and employees, thus lessening the burden on the govt.
Why Employees are protesting against NPS?
- Despite the contribution of 10% by the NPS employees of their wages every month for their entire service receive a very pension much lower than the OPS.
- The pension under NPS is static and there is no dearness relief to compensate the inflation as available in the OPS.
- There is no GPF advantage and the amount of pension is not fixed as the scheme is market-linked and based on returns.
Link: Govt. staff seek restoration of old pension scheme (thehindu.com)
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