By Azad Hussain
A person remains quite healthy and active through the productive age of his life, so can easily earn his livelihood. During this period of his life, he remains completely independent and can shoulder every responsibility not only for his own survival but also to run his family. But with the passage of time, as the law of nature brings a change to everything, same holds true with the age and health. By the time a person enters the old age stage, he starts becoming physically weak, develops health issues and loses his earning capabilities. Subsequently he happens to become totally dependent on others for every basic requirement.
Thus in the old age of one’s life, a person needs social and income security. Focusing on these two aspects of old age stage, government of India in 1999 commissioned a project called OASIS ( Old Age Social & Income Security). In 2003 OASIS came up with its report. Based on the recommendations of OASIS report, Government of India Introduced NPS (National Pension System ), for the central/ state government government employees who joined after January 1st 2004 except the armed forces. This pension system replaced the Old Pension Scheme (OPS). As the matter was state subject, in Jammu and Kashmir erstwhile state, NPS was introduced later with effect from January 1st 2010. Pertinent to mention that West Bengal was the only state which didn’t introduce NPS.
In this new pension system an employee contributes 10% of his basic pay plus DA and the government contributes 14% of the same to the Permanent Retirement Account Number( PRAN) of an employee, provided to him by government. This accumulated amount is used to buy equalities from some insurance companies, which makes this pension a market linked pension. At the time of retirement an employee is paid 60% of accumulated amount including returns as lump sum and remaining 40% of accumulated amount is used to buy an annuity from any life insurance company , choice of purchase is made by Pension Fund Regulatory Authority (PFRDA) to pay a monthly pension to a retiree.
At the time of its implementation, authorities made tall claims that NPS is going to provide good income security to the government employees after retirement. However things turned otherwise.
Those who have worked under NPS and retired recently have sad tales to narrate. If their narratives based on facts are to be believed, the dreams for secure post-retirement life, of government employees working under NPS, have shattered when all the tall claims, made by the government at the time of introduction of NPS, have fallen flat. Most of the retires have claimed that they took just between one thousand to two thousand rupees as monthly pension under the said system of pension, which is very insufficient for meeting the expenses, when the prices of commodities are skyrocketing, even not sufficient to buy the required medicines in old age.
There are various other reasons which have reduced the attractiveness of NPS, like there are some rigid rules for withdrawals of the NPS. During the service of a person,there are multiple occasions where he or she might need money. Under existing NPS withdrawal rules the maximum amount that a subscriber can withdraw during his service is up to 25% of his own total contribution. At such stages, partial accessibility to one’s own funds disappoints an employee for not enjoying financial freedom.
Under NPS the pension of a retiree remains fixed; on the other hand there is year-on-year inflation in expenses. This will gradually lose the purchasing power of fixed pension of a person. On the other hand, time to time DA hike is made to monthly pension to Old Pension Scheme (OPS) pensioners.
Over and above this, currently the matter of concern for NPS employees is the loss of assets. Over a period of last few weeks, bearing the brunt of inflation, government employees working under NPS have got disappointed due to negative returns of their contributed money to their PRAN (Permanent Retirement Account Number). Most of the government employees have claimed to have lost around fifty thousand or more rupees and are still continuously losing the total NPS account balance due to volatility in the equality market. As all employees are not economists, so why there is a huge loss in the NPS assets, nothing can be perceived from a layman’s point of view. However it can be said that market based pension system is risk linked.
Keeping in view the reaction of retires under NPS and its drawbacks in comparison with OPS ( old pension scheme) , the government employees throughout the country have started raising their voices against this pension system and putting forth a demand to restore old pension scheme.
Recently a ray of hope emerged among NPS government employees when Rajasthan and Chhattishgarh announced the restoration of Old Pension Scheme for all those government employee who were working under NPS. Hope that same kind of significant decisions may come out for the other states and union territories of the country. This will give a sigh of relief to lakhs of government employees and their families by securing the post retirement life of such employees.
Azad Hussain can be reached at email@example.com