Middle path: On the Unified Pension Scheme
The modified pension scheme overcomes some shortcomings of NPS
The Centre has restored guaranteed pensions for its employees, meeting their demand halfway, and weakly trying to hold on to principles of fiscal prudence. Pension schemes around the world, whether contributory and market linked or underwritten by the exchequer, are facing a crisis, due to multiple factors, including demographic reasons. According to the Reserve Bank of India, the total Budget estimates of various States and Union Territories for pension in 2023-24 was ₹5,22,105.4 crore, which is between 6%-21% of their total revenue receipts. Pensioners argue that it is their deferred wages. It can also be argued that pensions from the exchequer are at the cost of future generations. Governments are outsourcing jobs through contracts, and resorting to innovations such as Agnipath — a short service scheme for the military services — and the ballooning of pension bills is among the reasons that drive such measures. Governments are also leaving posts unfilled. All such measures are leading to two things. First, it negatively affects state capacity, and second, it reduces avenues for government and public sector jobs for India’s expanding number of young job seekers. The New Pension Scheme (NPS), which was market-linked and managed by an autonomous entity, was introduced during the stock market boom. Two decades later, when people began retiring under the NPS — those who joined after January 1, 2004 — it turned out that they were receiving much less than what they would have got under the old scheme.
With the Congress making the restoration of the old scheme a central piece of its politics, the BJP was pushed to the corner. A committee led by former Finance Secretary and Cabinet Secretary-designate T.V. Somanathan devised a middle path that involves employee contributions and enhanced share from the Centre. The Unified Pension Scheme (UPS), approved by the Cabinet, promises a pension of 50% of the average basic pay of the last 12 months before retirement and a minimum pension of ₹10,000 for those who worked for at least 10 years. The Centre’s share towards the scheme was increased from 14% under the NPS to 18.5%, which Prime Minister Narendra Modi has said will ensure government employees dignity and financial security. The BJP and the government should note that no reform can be sustainable without broad political consensus. Social security for older people must cover the widest segment of the population. Government employees are an organised pressure group, and having managed to restore their guaranteed pension, they should wholeheartedly welcome the UPS, rather than protest against employee contribution