(Our Special Correspondent)
Almost all states after decades seem to have shifted to the new National Pension System (NPS) from the erstwhile Old Pension Scheme (OPS).
But, the Congress-ruled states like Rajasthan and Chhattisgarh have announced reverting to the old way of providing pensions to people. So was the Aam Aadmi Party (AAP) ruled Punjab, which also announced the dumping of the new pension plan, which is essentially a “pay as you go” scheme. OPS makes it politically attractive, simply because it offers an assured benefit to the retiree, fixed at 50% of the last drawn basic pay. Like the salaries, pensions were also increased with hikes in dearness allowance, essentially to account for inflation. However, several economists argue that going back to the OPS may be a bad fiscal policy, Yet, undeterred Congress leaders argue that in many states, OPS is an issue and they are willing to promise this sop to voters.
On December 9, when asked about carrying forward the reforms related to the new pension scheme, the party’s general secretary for communications Jairam Ramesh said, “The word reforms is much-abused. Anything and everything can get classified as reforms and then all conversation comes to a stop. This old pension scheme is a running demand for many years.”
The NPS was brought during Atal Bihari Vajpayee’s government and rolled out on January 1, 2004. When the Narendra Modi government came to power, it offered tax benefits on the scheme to make it popular.
At the heart of the old “pay as you go scheme”, operational till 2004, lay an intergenerational disparity, according to analysts. Under it, contributions from the current generation of workers were used to pay for the pensions of current pensioners, making it an unfunded pension scheme because it represented a direct transfer of resources from the current generation of taxpayers to fund the pensions.
