An Overview of New Contributory Pension System (NPS) - Confederation
NEW CONTRIBUTORY PENSION SYSTEM (NPS)
M.Krishnan
Secretary General
Confederation of Central Govt. Employees & Workers
Pension
system was in vogue in India for a century or more and the British
Government during the pre-independence era introduced Pension Rules for
Government employees and thus made it statutory. In the year 1982
Supreme Court in its landmark judgement in Nakara's case declared that -
"as per India's constitution, Government is obliged to provide social
and economic security to pensioners and that Government retirees had the
fundamental right to pension….. Pension is not a bounty nor a matter of
grace depending upon the sweet will of the employer. It is not an
ex-gratia payment, but a payment for past service rendered. It is a
social welfare measure, rendering socio-economic justice to those who in
the hey days of their life, ceaselessly toiled for their employers on
the assurance that in their old age, they would not be left in lurch."
During
the advent of globalisation policies in 1980's the pension reforms also
started simultaneously. IMF & World Bank started publishing so many
reports and documents emphasizing the need for pension reforms. They
also started studying about the reforms to be undertaken in the pension
sector in India. In 2001, "IMF work paper on pension reforms in India"
and World Bank India specific report "India - the challenge of old age
income security" were published. Their work reports emphasized that
"Pension obligations or promises made by the Governments which have
potential of exerting pressure on Govt. finances, have been a subject of
increased focus in assessing medium to long term fiscal
sustainability." In tune with the dictates of IMF and World Bank BJP-led
NDA Government appointed Bhattacharjee Committee in 2001 headed by
Ex-Chief Secretary of Karnataka, to study and recommend pension reforms.
Thus after creating ground for pension reforms, under the pretext of
implementing recommendations of Bhattacharyya Committee, the NDA
Government introduced New Pension System called Defined Contributory
pension system for all employees who join service on or after
01-01-2004. The Congress-led UPA Government which came to power in 2004
continued with the reforms and promulgated an ordinance to legalise NPS.
But UPA-I Govt. could not pass the Pension Bill in Parliament due to
stiff opposition of Left Parties supporting it. Later when UPA-II
Government came to power the Pension Regulatory and Development
Authority (PFRDA) Bill was passed in the Parliament with the support of
BJP, the then opposition party. Many State Governments governed by
political parties other than Left Parties, introduced Contributory
Pension System for their employees from various dates after 2004. Left
Front Governments of Kerala, West Bengal and Tripura refused to
introduce the New Pension Scheme and they continued with the old defined
benefit pension scheme. Congress-led UDF Government introduced NPS in
Kerala. After BJP coming to power in Tripura also Contributory Pension
Scheme is introduced recently. In West Bengal old Pension Scheme
continues even now. Not only newly appointed Central and State
Government employees, almost all new entrants of public sector and
Autonomous bodies are also brought under the purview of NPS.
As per
New
Contributory Pension Scheme an amount of 10% of pay plus Dearness
Allowance will be deducted each month from the salary of the employees
covered under NPS and credited to their pension account. Equal
amount is to be credited by the Government (employer) also. Total amount
will go to the Pension Funds constituted under the PFRDA Act. From the
pension fund the amount will go to the share market. As per the PFRDA
Act - "there shall not be any implicit or explicit assurance of benefit
except (share) market based guarantee mechanism to be purchased by the
subscribers". Thus the amount deposited in Pension Fund may or may not
grow depending on the fluctuations in the share market. After attaining
60 years of age i.e., at the time of retirement, 60% of the accumulated
amount in the Pension Account of the employee will be refunded and the
balance 40% will be deposited in an Insurance Annuity Scheme. Monthly
amount received from the Insurance Annuity Scheme is the monthly pension
i.e., Pension is not paid by Government, but by the Insurance Company
and hence
NPS is nothing but Pension Privatization..
Thus
it can be seen that the growth of the accumulated amount in the Pension
fund depends upon the vagaries of share market. If the share markets
collapse, as happened during the 2008 world financial crisis, then the
entire amount in the pension fund may vanish. In that case employee will
not get any pension. Every fluctuation in the share market will affect
the future of pension of those employees who are covered under NPS.
Uncertainty about pension and retirement life looms large over their
heads. Even if there is a stabilized share market the 40% amount in the
annuity scheme is not enough to get 50% of the last pay drawn as
pension, which is the minimum pension as per old pension scheme. Many
employees who entered in service after 01-01-2004 has retired in 2017
and 2018 after completing 12 & 13 years of service. They are getting
Rs.1400- to Rs.1700- only as monthly pension from Insurance Annuity
Scheme. If they have entered service in 2003 i.e., in the old pension
scheme, they would have got 50% of the last pay drawn as pension subject
to a minimum of Rs.9000- as minimum pension, that too without giving
any monthly contribution towards pension from their salary.
In short, NPS is nothing but NO PENSION SYSTEM.
As
per clause 12(5) of the PFRDA Act even the employees and pensioners who
are not covered under NPS, can be brought under the Act by a Gazette
notification by the Government. Thus NPS is a Damocles' sword hanging
over the head of all employees and pensioners.
Who is the
beneficiary of this pension reforms? As in the case of every neo-liberal
reforms, the ultimate beneficiary is the Corporates. The huge amount
collected from the workers through pension fund is invested in share
market by the Pension Fund Managers and this amount in turn can be
utilied by the multi-national Corporates for multiplying their profit.
Amount deducted and credited to the Pension fund from each newly
recruited employees plus the employer's share amount will remain with
the pension fund and share market for a period of minimum 30 to 35 years
i.e., till the age of 60 years. During this long period of 35 years
crores and crores of rupees will be at the disposal of share market
controlled by multinational corporate giants. Ultimate causality will be
the poor helpless employee/pensioner.
Confederation of Central
Government Employees and Workers and All India State Government
Employees Federation (AISGEF) has been opposing the NPS from the very
beginning and a one day strike was conducted on 30th October 2007. It
was one of the main demand in all other strikes during these period. The
campaign and struggle against NPS continued and as of now the
subjective and objective conditions for a bigger struggle against NPS
has emerged as almost 50% of the total employees in Central, State,
Public sector and Autonomous bodies are now covered under NPS and are
becoming more and more restive and agitated. 7th Central Pay Commission
Chairman Retired Supreme court Judge Sri. Asok Kumar Mathur has
correctly pointed out that "Almost a whole lot of Government employees
appointed on or after 01-01-2004, were unhappy with New Pension Scheme.
Govt. should take a call to look into their complaint".
As per the
recommendations of 7th CPC, Central Government appointed a Committee
called "NPS Committee" for streamlining the functioning of NPS. The
Staff-side has demanded before this Committee to scrap NPS and guarantee
for 50% of the last pay drawn as minimum pension subject to a minimum
of Rs.9000-. Even though, the Committee has submitted its report 18
months back, the Government has not yet disclosed the recommendations of
the Committee.
Confederation and AISGEF has decided countrywide
intensive campaign culminating in one day strike on 15th November 2018
demanding that the Defined Contributory Pension Scheme (New Pension
Scheme - NPS) imposed on new entrants must be scrapped and the
Government should reintroduce the Defined Benefit Pension Scheme (Old
Pension Scheme - OPS) that was in vogue for a century or more. We are
also exploring the possibility of organizing an indefinite strike in the
coming days exclusively on one demand i.e.,
SCRAP NPS, RESTORE OPS for which wider consultations are being made with all like-minded organizations.
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e-mail: mkrishnan6854@gmail.com
Source:
Confederation
