Pension: UPS offers a good balance
The newly-announced Unified Pension Scheme (UPS) for central government employees may be a political response of Prime Minister Narendra Modi’s government to the opposition and setbacks it has faced over the pension issue but, at least on the face of it, seems to offer a good balance between the Old Pension Scheme (OPS) that was extant before 2004 and the National Pension Scheme (NPS) that was ushered in thereafter. In the main, the UPS keeps the employee contribution part of the NPS, while adding the assured pension part of the OPS, with the exchequer ready to contribute to ensure it. The government's contribution to the pension will increase from 14 per cent to 18 per cent, resulting in an additional fiscal burden of Rs 6,250 crore on the Centre. For its employees, the scheme ensures a minimum pension of Rs 10,000 for those who have served for a minimum of 10 years. At the higher end, employees will receive 50 per cent of the average salary drawn during the last 12 months of their service. These provisions are advantageous for employees, although they do not quite match the benefits offered under the OPS.
Although the unions are sceptical and await the fine print, the move offers the Opposition much to think about. The Congress party has gained traction in some states by promising to bring the OPS back in full. The UPS offers Congress governments a chance to partially fulfil the party’s promise and claim moral victory over the BJP while also escaping the long-term burden of generous government-funded pensions such as the OPS. The Eknath Shinde government in Maharashtra has taken the lead to announce the implementation of the UPS, aimed at stealing the Congress’ thunder on the issue in the upcoming election. The BJP is likely to follow the same strategy in Haryana and Jammu and Kashmir, which are also headed for elections.
With the average life expectancy in India at about 70 years and rising, the financial burden of pension payouts has risen and successive governments have felt that it could go out of hand in the coming decades. There are instances of pensioners receiving benefits for a period longer than their actual service tenure. As governments worldwide struggle with their pension burdens, the Modi 2.0 government’s reflex was to implement measures like the Agniveer scheme, lateral entry, and keeping many posts vacant, merely to reduce the long-term pension burden. The UPS scheme is a vast improvement in terms of the government’s response. Perhaps more is to be expected in this direction, including on the Agniveer scheme, as the elections approach. Meanwhile, government employees will do well to keep in mind that they are better off, even with the UPS, in a country where the vast percentage of the population does not have access to any form of pension or social security.