Draft triennial report of central government employees
New Contributory Pension Scheme (NPS)
14.1.1. Government of India introduced the NPS in 2003 through a Gazette Notification dated 22nd December 2003, to all new entrants recruited on or after 01-01-2004.Thereafter Pension Fund Regulatory and Development Authority (PFRDA) Act came into effect from 18th September 2013.
14.1.2. 7th Central Pay Commission Chairman Retired Supreme Court Justice Shri. Ashok Kumar Mathur, in Para 1.24 of its Report made the following observations –
Almost a whole lot of Government Employees appointed on or after
01-01-2004 were unhappy with the New Pension Scheme. While National Pension System (NPS) did not form a part of our Terms of Reference, we have recorded the sentiments of the affected employees. The Government should take a call and step into to look into their demands.
14.1.3. In para 10.03.11, the 7th CPC again made the following observations –
The larger Federations and Staff Associations advocated scrapping of the NPS on the ground that it discriminates between two sets of Government employees. Individuals covered under NPS have pleaded for reverting to Old Pension Scheme (OPS) on the grounds of uncertainty regarding the actual value of their future pension, on the face of market related risks.
14.1.4. The 7th CPC further made the following recommendations in para 10.3.25 –
The Commission notes that no department of Government of India is taking ownership of the NPS. The Commission recommends that a committee consisting of Secretary, Department of Financial Services, Secretary, Department of Pensions and Pensioners Welfare and Secretary, Department of Administrative Reforms and Public Grievances may be constituted to review the progress of implementation of NPS.
14.1.5. Government appointed a committee called “NPS Committee” headed by Secretary, Pension and Pensioners Welfare for streamlining the functioning of NPS. This Committee has submitted its report to the Government two years back, but Government has not yet published its report.
14.1.6. In the meanwhile Government decided to increase the contribution to be made by the employer (Government) from existing 10% to 14%.
14.1.7 Shri.Arun Jaitley, former Finance Minister, in his letter dated 3rd January 2019 addressed to Shri. Nitin Gadkari, another Cabinet Minister, stated as follows:
NPS is expected to provide old age income security to subscribers besides providing capital for the social and economic development of the economy.
14.1.8. Finance Minister gave the following reply in the Parliament on 25-12-2018
Representations have been received which inter-alia also include the demand that Government may revert to Old Defined Benefit Pension System (OPS). However, due to rising and unsustainable pension bill and competing claims on the fiscal, there is no proposal to replace the National Pension System (NPS) with Old Pension System (OPS) in respect of Central Govt. employees recruited on or after 01-01-2004.
14.1.9. During the past 2-3 years many NPS employees, recruited after 01-01-2004 have retired from service after completing 10 to 13 years of service. Their Annuity Pension received from Insurance Company under NPS is Rs.700/- to Rs.2,700/- per month only. As per the Old Pension Scheme (OPS), an employee retiring after minimum 10 years of regular service is eligible for a minimum pension of Rs.9,000/- per month or 50% of the last basic pay drawn by the official while in service, which ever is higher. As per the latest RTI information the number of Govt. employees covered by NPS is 66 lakhs, out of which 19 lakhs are Central Govt. Employees who joined service after 01-01-2004.
14.1.10. The very issue of a mandatory contribution and non-guaranteed Insurance Annuity benefit as pension was questioned by the employees at the National Council meeting of the Joint Consultative Machinery (JCM), the National Negotiating Forum of the Central Government Employees. In the discussion that ensued, the Government held out a solemn assurance on 14-12-2017 as under:
For employees who had entered Government Services on or after 01-01-2004 are not likely to be worse off vis-a-vis the current pension system in force as the replacement rate would match to the present one. Thus NPS is a Win-Win situation for employees and Government.
14.1.11. It was in the wake of these pension reform process, the Government of India set up Sixth Central Pay Commission headed by Retired Supreme Court Justice Shri. Sree krishna. The said commission referred the New Contributory Pension Scheme for a deeper study to the Centre for Economic Studies and Policies, Institute for Social and Economic Change, Bangalore headed by Dr. Gayatri. The study team in their report made the following observations –
That the Government’s liability on account of Contributory Pension Scheme would in effect increase, for the periods spanning for the next 34 years from the existing Rs.14,284 crores to Rs.57,088 crores (2004-2038) and is likely to taper off only from 2038 onwards. The exchequer is bound to have an increased outflow for the next 34 years and will be called upon to bear the actual pension liability of Defence Personnel (as military personnel are exempted from the purview of NPS), besides making the contribution to pension fund of Civil Servants recruited on or after 01-01-2004.
The specious plea that the exchequer is bound to gain due to contributory pension scheme is, therefore, not borne from fact.
14.1.12. The study report ultimately concluded that – “Mainly given the fact that the future liability, although may be large in terms of absolute size, is not to last very long and does not constitute an alarmingly big share of the GDP which is also on the decline. It appears that pursuing the existing “Pay as you Go” pension system, to meet the liability, will be an ideal solution.”
4.1.13. Most of the State Governments are finding it difficult, given its feeble resources, to affect the mandatory contribution under the NPS. To their dismay and to match with the conclusion of the report of the Bangalore Institute, the financial outflow of the pension account under NPS went on increasing, making the state Governments compulsory defaulters in providing the matching contribution. Many of the State Governments are also faulted in making over the subscriptions received from the employees to the Fund Manager. Thus even the meagre annuity that an employee was to receive under NPS as pension got vanished.
14.1.14 It is now more than a decade the NPS is in operation. The Central Government did not even insist to provide a Minimum Guaranteed Pension (ie. 50% of last pay drawn or Rs.9,000/- whichever is higher) under NPS which the Parliamentary Standing Committee has recommended. Large number of employees have joined in Central Government services since 2004 and so is the case with various State Governments, who have also adopted NPS in replacement of OPS. It is estimated that they presently constitute almost 50% of the total employees in Government offices in the country. The deeper study of the functioning of the NPS has proved that the promised better returns in the form of Insurance Annuity is nothing but an ever eluding mirage. A scheme, which is ab-initio conceived to loot the employees for the benefit of the corporates is beyond repair and is required to be discarded lock, stock and barrel.
14.1.15. It is however, educating to note that during the presentation made by the IPS Officers All India Association before the NPS Committee constituted by the Government, they could succinctly bring forth the startling fact that an IPS Officer of 2003 batch, who could rise to the level of Secretary while retiring in 2037 (after 35 years service) will get pension 3.25 times higher than a 2004 Batch IPS Officer, who also retires in 2037. They have further stated that the pension differential of the very same officers after 10 years of retired life shall be in the ratio of 1:7.3. Quantum-wise two officers would receive in 2037 Rs.3.78 lakhs and 1.16 lakhs respectively. These computations and comparisons based on the projection of return on NPS made by the PFRDA reveals as to how the employees had been deceived in the name of pension reforms.
14.1.16. The concept of pension has been explained by the 4th Central Pay Commission headed by Supreme Court Justice (Rtd) Singhal in the following terms-
Pension to the former members of Armed Forces and Civilian employees of Central Government is not by way of charity or an ex-gratia payment, or a purely social welfare measure. It is in the nature of a “right” which is enforced by the law. Later the concept was further strengthened by the Landmark judgement delivered by the Supreme Court in 1982 in a Writ Petition filed by D.S Nakara Vs. Union of India. Supreme Court declared that the pension is not only compensation for loyal service rendered in the past, but has also a broader significance in that it is a measure of socio-economic justice which inheres economic security in the fall of life, when physical and mental prowess is ebbing corresponding to ageing process and therefore, one is required to fall back on savings.
14.1.17. As explained in the foregoing paras, NPS does not guarantee returns. Benefits depends upon as to how the investment has fared in the share market. As per the extant instructions, the Fund Managers are advised to invest upto 50% in Government Bonds, 45% in Debt Securities, 5% in Money Market instruments and upto 15% in equities. In such an investment pattern, the returns are bound to be low or uncertain and the subscribers, the worst sufferers. The stock markets have never remained strong over a long period of time. It is not only volatile but susceptible to manipulation and machinations. The global financial crisis in 2008 has been the product of investment derivative manipulations. It wiped out entire savings of thousands of workers, employees, teachers and many others. No Government came to render help to these unfortunate losers.
14.1.18. In this situation, we emphatically demand that the defined Contributory Pension Scheme (called as NPS) imposed in replacement of Defined Benefit Pension Scheme (called as OPS) must be scraped to end the untenable discrimination of pre and post 2004 entrants to Government service and reintroduce the Defined Benefit Pension Scheme (OPS) that was in vogue for a century or more. In other words Government must come forward to amend the PFRDA Act to exclude Central and State Government employees from its ambit and operation.