One scheme that keeps coming up in Uttar Pradesh election discourse and has been mentioned in Samajwadi Party and Congress manifestos is the government employee pension.
Akhilesh Yadav announced last month that if the SP formed the government, it would restore an “old pension system” from before 2005 (the SP was in power at the time, led by Mulayam Singh Yadav). Six days later, UP Chief Secretary Durga Shanker Mishra held a review with officials and issued a statement detailing how the “new pension scheme” was more beneficial. Chief Minister Yogi Adityanath then attacked Akhilesh, saying the “new pension scheme” was in fact authorized in 2005 under Mulayam and remained in cold storage.
On Wednesday, Congress entered the game, with his manifesto promising a “half-way” solution.
Whatever scheme is finally applied, the beneficiaries would be those retiring around 2030-35, since it would apply to those hired after 2004. However, in the short term, all parties have their eyes on the 12 lakh government employees and their families.
What is the new pension scheme?
The scheme, now called the National Pension System (NPS)was introduced by the Center for all appointments after 1 January 2004. The NPS is governed by the PFRDA (The Pension Fund Regulatory & Development Authority) Act, 2013.
Under the NPS, every government employee is assigned a permanent retirement account number and is required to contribute 10% of their salary and allowance to the pension fund, which is matched by the government. This money can then be invested by fund managers. After the last amendment, in 2019, the government share of the contribution was increased from 10% to 14%.
Upon retirement, the employee can withdraw 60% of the corpus but must invest at least 40% to purchase an annuity from an insurance company regulated and registered by government authorities. The interest on the annuity must be paid as a monthly pension to the employee.
The Center left it up to the states to adopt the new system. The Moulayam government did so in 2005.
What is the difference with the old pension system?
The fundamental difference is that the NPS is a contribution-based pension system. Under the old system, the pension was set at 50% of the last basic salary received, together with other benefits. Thus, the service due has been defined beforehand. However, in the case of NPS, the retirement benefit is determined by factors such as the amount of contributions paid, the age of joining, the type of investment and the income derived from this investment.
What is the government’s position?
Additional Chief Secretary, Information Navneet Sehgal told The Indian Express that it was “virtually impossible” for the government to revert to the old structure. First, any State withdrawing from the regime notified by the Center had to obtain its approval. Secondly, he said, Rs 20,000 crore of funds raised from employee and government contributions have already been invested in the market for a fixed term.
He also said that in discussions with employees, they explained that in 20 years, the benefits they would receive would not be lower than those of the old plan. “The government’s objective is to ensure that employees in no way receive less than they could have had in the previous plan,” Sehgal said.
Why are employees concerned?
The NPS has been opposed to the UP from the beginning. Over the years, this has gained weight with the increase in the number of government employees, especially in education, to 12 lakh now. The parties anticipate the decision to also influence the voting behavior of thousands of young people in the state whose first preference is a government job.
Attempts by the government to clarify the “benefits” of the NPS have been rejected by the unions. “We have contacted different parties to try to explain to them what we want. The SP, after a long discussion, agreed to put it in its manifesto,” says Hari Kishore Tiwari of Rajya Karamchari Sanyukta Parishad.
According to him, the formula worked out with the SP is that with long years of service remaining for those who joined after 2004, the government would create a separate fund in its own right, with contribution from employees, and employees would receive pension benefits. retirement. of the same.
However, not all unions are in favor of returning to the old regime. “The NPS is undoubtedly market-driven, but like any other market-driven plan, in the long run it has greater benefits. Moreover, in the coming times, no government could bear the burden alone as the payments would amount to thousands of crores,” said Yadvendra Mishra, President of the Uttar Pradesh Secretariat Employees Union.
Tiwari has a counter to this: “All calculations in support of the NPS are based on the assumption of an average return on investment of 9% of our funds. But, which government can ensure this return in the long term.
Tiwari also points out that there have been several instances of fund managers like LIC investing in companies that turned out to be failing. “Furthermore, some audit reports have shown that the government does not regularly deposit its share of the fund.”
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