The Hindu Editorial Vocabulary– Mar 24, 2023; Day 415

The old and the new: On the demand for the Old Pension Scheme

A combination of the features of the two pension schemes seems prudent (marked by sound judgment)

The Union Finance Ministry’s reiteration (The act of repeating over and again (or an instance thereof)) in the Rajya Sabha recently, of the legal position, i.e., the absence of any provision to allow the accumulated (Added together or increased by growth over different time intervals) corpus (Capital as contrasted with the income derived from it) of members of the National Pension System (NPS) to be “refunded and deposited back” to States, should have a deterrent (Something that acts to discourage certain behaviour or action) effect on those States contemplating (Consider as a possibility) a return to the Old Pension Scheme (OPS). The Ministry’s stand reflects what the Pension Fund Regulatory and Development Authority (PFRDA) Act, 2013, the PFRDA (Exits and Withdrawals under the National Pension System) Regulations, 2015, and other regulations say. The Centre has also been making it clear, for the right reasons, that it is not considering any proposal to restore the OPS. As experts and the Reserve Bank of India (RBI) point out, the annual saving in fiscal resources that a reversion (a return to a previous state, practice, or belief) to the OPS entails (Have as a logical consequence) is short-lived. The potential fiscal (Relating to finance) benefit would be overtaken by the huge liability later in the form of pension payment. The former RBI Governor, D. Subbarao, even called the idea “regressive” (Opposing progress; returning to a former less advanced state), with more privilege for government servants than the public, many of whom have no social safety net (an arrangement that helps to prevent disaster (usually with money) if something goes wrong).

However, the issue refuses to die down, as government employees or those in government-controlled enterprises have been fighting for it. Be it Maharashtra, Uttar Pradesh or Karnataka, staff have struck (Stop work in order to press demands) work, demanding, among others, the re-introduction of the OPS. But their concern about the uncertainty over the amount of pension under the NPS is genuine as they are justified in aspiring (Desiring or striving for recognition or advancement) for a quality retired life. The NPS, despite being PFRDA regulated, is a market-linked and defined contribution product, while the OPS is a defined benefit pension scheme, where beneficiaries (The recipient of funds or other benefits) generally get 50% of their final salary, and the whole cost is borne by the government. So, the flat rejection of the demand for the OPS would only exacerbate (Make worse) the situation. It is time that the Centre formulated a scheme that combines features of the old and the new. While retaining the element of employees’ contribution, the scheme can have higher contributions by the government, which should also step in if the returns do not ensure the prescribed minimum pension amount. A proposal by Andhra Pradesh last year deserves attention. Holding on to the contributory character of the NPS, the proposal guarantees 33% of basic pay. If required, it can be improved upon to suit the requirements of other States too. Better health facilities that include a liberal (Showing or characterized by broad-mindedness) insurance scheme can be considered. On their part, the employees should be both pragmatic (Concerned with practical matters) and willing to resolve the issue.

Want to improve your vocabulary further? Download the Lists of Word-Meanings of Previous Months here.