Letters: Review pension system | Business Standard Letters



Ramanath Nakhate’s letter captioned “United fight for pension” (July 24) gives deep insight into the plight of a section of pensioners who retired from some public sector institutions. The reasons for the government of India (GoI) and organisations like Life Insurance Corporation, Reserve Bank of India and public sector banks in which pension schemes had been introduced during the 1990s, lending a deaf ear to genuine demands for pension revision, may be different from those being shared in public. To understand that, one may have to look at the status of pension scheme applicable to central government employees. By an executive order issued in December 2003, the GoI divided central government employees into three classes for the purpose of pension benefits:


* Employees who were in service as on December 31, 2003, who will continue to enjoy the benefits of “defined benefit pension scheme” that was in existence on that day, for life (assuming the employee who joined on December 31, 2003, at the age of 25 may retire in 2038 and assuming the person lives up to the age of 80, the pension scheme will remain in force till 2058).




* Defence personnel: Serving and new defence personnel (joining after December 31, 2003) will continue to enjoy the benefits of defined benefit pension scheme.


* Central government employees joining service on or after January 1, 2004, will be covered by a “defined contribution-based pension scheme” called NPS (New Pension Scheme, rechristened as National Pension System) where employees’ contribution of 10 per cent of salary will be augmented with a matching contribution of 10 per cent by the employer. NPS differs from the old Contributory Provident Fund only in regard to certain details in regard to provisions relating to investment/fund management/withdrawal.


The reason given for the introduction of NPS was rising pension liabilities. The pension liability may start tapering only after a few more decades. All these call for a comprehensive review of the Indian

Leave a Reply

Your email address will not be published. Required fields are marked *

*

1 × 4 =