Demand for scrapping new pension scheme grows: Opposition’s poll agenda should include its replacement

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% of their pension contribution in bulk and out of the remaining 40% they get barely ₹700 and ₹800 every month as annuity after remitting 10% of their salary for 15 years! So the paltriness of the NPS scheme 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 16 November 2018, the Union Minister for Railways Piyush Goyal was chased out from a function venue by railway employees protesting against the New Pension Scheme (NPS) at Lucknow.

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 16 February 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 the employees are opposing the New Pension Scheme?

Under the old pension scheme, the minimum pension amount was pegged at 50% of the last salary drawn or ₹9000 per month whichever was higher but NPS has no such floor.

Under the NPS, the government employees would contribute 10% of their salary to the pension fund and the government would make a matching contribution of 10%. 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 30 April 2018, while the subscriber base of government sector NPS was around 58 lakh with assets under management (AUM) of around ₹ 2.03 trillion, the subscriber base for private sector was only around 14 lakh with an AUM of ₹ 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% only.

The Seventh Pay Commission recommended that the government should increase its contribution to 20% and suggested formation of a committee of secretaries to work out the modalities for the same. But Arun Jaitley constituted a committee of handpicked bureaucrats and, without even making public their recommendations, arbitrarily increased the government contribution only to 14% on 10 December 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 ₹82,000. Starting at the age of 20, if she/he invests ₹8200 in a bank monthly recurring deposit at 8.5% compound interest, she/he would accumulate a corpus of ₹3,33,51,528 after 40 years. If the government contributes 20%, the addition to the corpus would be ₹6,67,03,055 and the pension after 40 years would be ₹8,33,788 per month. If the government contributes only 14%, the corpus would be ₹4,66,92,139—or, ₹2,00,10,916 less and the pension after 40 years would be ₹3,89,101. Per month the worker would be getting ₹4,44,687 less. Assuming that he/she gets a pension for 10 years, he she would be losing ₹5,33,62,440. Even without adding the loss on the corpus, the commandant would be losing over ₹5 crore on pension alone! This is what the BSF second-in-command Neeraj Lakhanpal showed during his stint at the Institute of Border Management and Strategic Studies which was widely publicized by the media on 3 December 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 manifestos. Any new government can ignore this demand only at its own peril.