Explained: Old vs. new pension systems and why government workers are protesting


After Rajasthan Prime Minister Ashok Gehlot said last month that the senior pension system for government employees would be revived, other states have started making similar demands, including Bharatiya Janata Party-ruled Himachal Pradesh and Madhya Pradesh. Massive protests were witnessed in Shimla last week as government officials in Madhya Pradesh prepare for a demonstration on April 14 – the birthday of BR Ambedkar.

The old pension system was abolished by the BJP-led central government in December 2003 when Atal Bihari Vajpayee was prime minister. Its replacement, the National Pension Scheme (NPS), came into effect on April 1, 2004.

Following protests calling for the NPS to be rolled back, Himachal Pradesh formed a panel led by Ram Subagh Singh, the government’s chief secretary, to restore the old scheme.

Also read | Himachal Assembly in Session: Congress Abandons Old Pension Scheme

Himachal Chief Minister Jai Ram Thakur announced the establishment of the panel at the assembly last week while responding to the motion of thanks to the governor’s address.

Meanwhile, after Rajasthan, another Congress-ruled state – Chhattisgarh – is set to announce the reintroduction of the old pension system from next fiscal year. Congress leaders said the old scheme was discussed by former party leader Rahul Gandhi with Gehlot and Chhattisgarh Chief Minister Bhupesh Baghel.

What is the new pension system?

The National Pension Scheme (NPS) was created to allow the government to get rid of pension obligations. According to a news report citing research from the early 2000s, India’s pension debt reached unmanageable levels.

The NPS allows subscribers (government employees) to choose where to invest their money by making regular contributions to a retirement account throughout their career. After retirement, they can take part of the pension as a lump sum and use the rest to buy a pension for a regular income.

How is it different from the old pension scheme?

The old pension system was defined in contrast to the NPS based on return on investment. In the case of the NPS, the state and employees contribute equally to the pension fund. The old system provided for 50% of the last salary as a pension. The minimum payment to pensioners as an annuity is 3,500 in the NPS, with those over 80 receiving an additional pension of between 20 and 100 per cent of the basic pension, according to policybazaar.

Which federal states have reintroduced the old pension regulations?

Rajasthan has announced it will bring back the old pension system in the state from next fiscal year and Chhattisgarh is expected to follow. While discussing the issue with Rahul Gandhi, Gehlot told Congress leaders that the governments of Kerala, Andhra Pradesh and Assam had also formed committees on the old pension system.

What are the political leaders saying?

The demonstrators in Himachal Pradesh and Madhya Pradesh are also demanding the reintroduction of the old pension system in their states. Nearly 3.35 lakh workers in Madhya Pradesh who fall under the purview of the NPS plan to protest on April 14th. Opposition leaders in Madhya Pradesh are likely to raise the issue during the budget session that begins on March 7th.

Samajwadi Party (SP) national President Akhilesh Yadav has promised to bring back the old pension system in Uttar Pradesh if his camp emerges victorious in the current general election. The results of the election will be announced on March 10th.

Jharkhand Chief Minister Hemant Soren, whose Jharkhand Mukti Morcha (JMM) is in power along with Congress and Rashtriya Janata Dal (RJD), told the Assembly last week that he was not currently considering a proposal to restore the old pension system.

Before the 2019 election, Soren’s party pledged to crush the NPS.


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