The Union Cabinet has recently approved a new pension scheme — Unified Pension Scheme (UPS) — for its 23 lakh employees. This scheme will be available to all the Central government employees who had availed the New Pension Scheme in January 1, 2004. It will address the key concern of employees — certainty — as it provides a guaranteed pension to the employee after his or her retirement, and to the spouse after the employee’s demise.
Traditionally, the Indian social system ensured that the family took care of the elderly. However, the erosion of the joint family system and the rise of a penchant for individualism and financial independence has made post-retirement pension an important element in India’s new social fabric.
Unless one gets an adequate pension, they cannot have financial independence after retirement. This is something employees feared they would not get under NPS, which Opposition parties tried to tap by promising to implement the Old Pension Scheme. The Congress governments in Himachal Pradesh in 2023, and Rajasthan and Chhattisgarh in 2022, as well as the AAP government in Punjab (in 2022) have reverted to the Old Pension Scheme (OPS).
The UPS, however, tries to preempt the Opposition’s attempts to enlist the support of dissatisfied government employees. Under the new scheme, the employee’s contribution remains 10 per cent, the government’s contribution will go up from 14 per cent to 18.5 per cent, with an additional yearly expenditure of `6,250 crore.
The employee will get an assured pension, which is 50 per cent of the average basic pay drawn over the last 12 months prior to superannuation for a minimum qualifying service of 25 years. The spouse will receive 60 per cent of the pension of the employee immediately after her/his demise. Addressing another demand of employees to have periodic increase in pension to take care of inflation, the UPS offers Dearness Relief based on the All India Consumer Price Index for Industrial Workers.
Though government employees prefer the Old Pension Scheme (OPS), which does not require an employee to contribute, they could be satisfied by the UPS despite it being a contributory scheme like the NPS.
In 1990-91, the Centre’s pension bill was Rs 3,272 crore, and the combined expenditure of all the states was Rs 3,131 crore. By 2020-21, the Centre's pension bill had risen 58 times to Rs 1,90,886 crore and for states, the pension bill shot up 125 times to Rs 3,86,001 crore. The government — either at the Centre or in the state — cannot foot the bill alone under the OPS. The UPS is a middle ground for both the employees, and the governments.
All put together, government employees make up 1.13 crore people. Along with their families, the number may reach 4 crore people, which is a mere 2.85 per cent of population in the country of 140 crore. While increasing the pension is welcome, the government should not lose sight of the plight of other people, whose sustenance is limited to elderly pension or partial pension given by EPFO.
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