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Opinion

Seeking NPS replacement

There is an increasing demand for scrapping the New Pension Scheme

If there is a single demand that commonly figured in the recent protests of the Central and State government employees, public sector workers in defence production, telecom, railways, and banks as well by some workers in the private sector, it is the scrapping of the New Pension Scheme (NPS).

Though NPS was introduced in 2004, why resistance to it is peaking in 2018? Since the NPS covers employees recruited after 1 January 2004 and the age of retirement is 60, most employees are yet to avail the new pension. But a few are retiring now and as per the NPS regime, they can withdraw 60 per cent of their pension contribution in bulk and out of the remaining 40 per cent they get barely Rs.700 and Rs.800 every month as annuity after remitting 10 per cent of their salary for 15 years! So the paltriness of the NPS is gradually dawning upon them and so the anger mounts.

The National Federation of Indian Railwaymen (NFIR) has announced protest demos against NPS before PM Modi's residence on 13th and 23rd of March 2019. They even threatened to take a call on halting the trains. Earlier, on November 16, 2018, the Union Minister for Railways Mr. Piyush Goyal was chased out from a function venue by railway employees protesting against the NPS at Lucknow.

State government employees are also on a warpath. Andhra Pradesh government employees were on strike on December 15, 2018, and earlier launched a State-wide Guntur March on October 24, 2018, against the NPS. The TN government employees and teachers had to call off their strike opposing NPS only under diktats from the Madras High Court. Despite the Yogi Government invoking ESMA, UP government employees went on a long strike against NPS that ended in the first week of February 2019.

Reverting to the old pension scheme was a key demand when Maharashtra government employees went on a strike in August 2018, Uttarakhand employees in January 2018, Rajasthan employees in October 2018 and Odisha employees in September 2018.

On February 16, 2019, there was a lachrymal wave over the tragic loss of lives of BSF jawans in Kashmir and some political forces even tried to whip up war hysteria. But on 5 December 2017 when the retired BSF jawans staged on a demonstration as part of a joint demo by retired employees of all Central Paramilitary Forces including BSF, CRPF, ITBP, and SSB against NPS, nobody in the media even took notice.

Conditions might not have matured for a showdown with the government through an indefinite general strike on this demand alone. But scrapping of the NPS was a prominent demand in the 2 September general strikes of 2015 &2016, and on 8–9 January 2019.

Why are the employees opposing the New Pension Scheme? Under the old pension scheme, the minimum pension amount was pegged at 50 per cent of the last salary drawn or Rs.9000 per month whichever was higher but NPS has no such floor.

Under the NPS, the government employees would contribute 10 per cent of their salary to the pension fund and the government would make a matching contribution of 10 per cent. But government would make this matching contribution only in the case of government employees and not in the private sector.

Under the old pension scheme, the employees would get assured interest from the government for their accumulating pension fund. But under the NPS, the workers' savings would be invested in the stock market and their pension amount would be decided by accruals from the share market. Private pension funds would invest their money and make a profit for themselves.

Unlike the old scheme, the new pension scheme does not have a provision to provide monthly allowances to the dependents after the death of the pensioner.

NPS has been made compulsory for all government employees joining service after January 2014. But it is optional for the private sector. No wonder, as on April 30, 2018, while the subscriber base of government sector NPS was around 58 lakh with assets under management (AUM) of around Rs 2.03 trillion, the subscriber base for the private sector was only around 14 lakh with an AUM of Rs. 27,982 crore. Considering total the organised sector employment of 27.5 million in 2008—17.3 million public sector and 10.2 million in the private sector—this means the NPS coverage of the private organised sector workers is around 10 per cent only.

The Seventh Pay Commission recommended that the government should increase its contribution to 20 per cent and suggested formation of a committee of secretaries to work out the modalities for the same. But Jaitley constituted a committee of handpicked bureaucrats and, without even making public their recommendations, arbitrarily increased the government contribution only to 14 per cent on December 10, 2018. Over 40 years this would work out to a heavy loss to the workers.

Take, for instance, the case of a BSF commandant whose monthly salary is Rs.82,000. Starting at the age of 20, if she/he invests Rs.8200 in a bank monthly recurring deposit at 8.5 per cent compound interest, she/he would accumulate a corpus of Rs.3,33,51,528 after 40 years. If the government contributes 20 per cent, the addition to the corpus would be Rs.6,67,03,055and the pension after 40 years would be Rs.8,33,788 per month. If the government contributes only 14 per cent, the corpus would be Rs.4,66,92,139—or, Rs.2,00,10,916 less and the pension after 40 years would be Rs.3,89,101. Per month the worker would be getting Rs.4,44,687 less. Assuming that he/she gets a pension for 10 years, he/she would be losing Rs.5,33,62,440. Even without adding the loss on the corpus, the commandant would be losing over Rs.5 crore on pension alone! This is what the BSF second-in-command Mr. Neeraj Lakhanpal showed during his stint at the Institute of Border Management and Strategic Studies which was widely publicised by the media on December 3, 2017. Any tears to shed for this?

One would expect the central trade unions to lobby with the main opposition parties to include restoration of the old pension scheme as a top priority item in their manifestoes. Any new government can ignore this demand only at its own peril.

(The views expressed are strictly personal)

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