Syllabus: GS-II
Subject: Governance
Topic: Welfare schemes for vulnerable sections.
Issue: Pension Scheme.
Context: Maharashtra cabinet approves one-time option for state govt employees joining after Nov 2005 to opt for Old Pension Scheme (OPS).
Synopsis:
- Move addresses a long-standing demand but has a limited scope, benefiting a specific group of employees.
- Decision follows protests by employees demanding restoration of OPS.
- Benefits 26,000 employees selected before Nov 2005 but receiving joining letters later.
- OPS discontinued in 2005, offers monthly pension without employee contributions.
- Employees have six months to choose OPS or stick with New Pension Scheme, with a two-month document submission deadline.
Background:
Old Pension Scheme (OPS):
- OPS assured government employees a pension of 50% of their last drawn salary.
- Described as a ‘Defined Benefit Scheme,’ it provided a defined and secure retirement benefit.
- Discontinued by the Central government in 2003.
Concerns with OPS:
- Unfunded pension liability led to no specific corpus for continuous payouts.
- ‘Pay-as-you-go’ scheme caused inter-generational equity issues, burdening the present generation with the rising pensioner costs.
- Lack of a clear plan for future funding prompted the discontinuation of OPS in 2003.
What is New Pension Scheme (NPS)?
- NPS, introduced in April 2004, replaced OPS by the Central government.
- Open to employees in public, private, and unorganized sectors, excluding the armed forces.
- Administered by the Pension Fund Regulatory and Development Authority (PFRDA).
- Eligibility: Indian citizens aged 18-60, including NRIs.
- Minimum annual contribution: Rs. 6,000; failure to contribute results in account freezing.
Conclusion: OPS, with its defined benefit of 50% last drawn salary, provided assurance to government employees but faced challenges like unfunded pension liability and inter-generational equity issues, leading to its discontinuation in 2003.
