In this article, we discussed the pros and cons of National Pension Scheme, and its comparison with the Older Pension Scheme.
What is the scope of issue?
Recently, the Central government set up a committee to study and review the working of the National Pension Scheme. The objective of the initiative is to address the needs and demands of the government employees.
What is the issues with National pension Scheme?
National Pension scheme came into effect in 2004. Older pension scheme requires no contribution from government employees side. But, the new pension scheme (NPS) requires contribution of the government employees for there whole working life. The NPS requires employees contribution in whole of there working life.
Why the NPS system came in effect in 2004?
The primary reason is considered behind this is the fiscal situation of States. The contribution made by the government put burden on the state finances. It also had inflationary effect in economy. Due to all these reasons, Government introduced this new system of pension. In the new system, Employees equally contribute in the pension fund, which reducing the burden on the States.
Why the Older Pension Scheme is demanding?
In the OPS, the employees are entitled to receive 50 % of their last drawn salary, indexed with inflation. Hence we can say that, OPS take care of retired people. In NPS, we calculate different rates of return. It gives one-third of earning, if the rate of return is 6%. Even if someone gat 10% return, his/her pension will be less than what may earn in OPS scheme. Hence there are two fold reasons, of demands for the Older Pension Scheme. One is requirement of equal contributions, and secondly less return as compare to OPS.
Why number of states decided to return to Older Pension Scheme?
Many States including Rajasthan, Punjab, Chhattisgarh, Jharkhand and Himachal Pradesh have already implemented Older Pension Scheme. In States the organized labour force is generally in strong position. Many labour organizations since long demanding the implementation of Older Pension Scheme. Also, these organizations are in prominent in policymaking.
What is the significance of guaranteed pension scheme?
Pension is a state subject, hence states have full right to decide the structure of applicable pension scheme. However, the problem with the state is lack of sufficient finances. Simultaneously, minimum guaranteed pension is essential, to accomplish the objective of complete social security in India.