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Business News/ News / India/  Explained: Why govt employees are demanding restoration of Old Pension Scheme?
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Explained: Why govt employees are demanding restoration of Old Pension Scheme?

Some non-BJP-ruled states including Rajasthan, Chhattisgarh, Jharkhand, Punjab, and Himachal Pradesh have already reverted to OPS and ditched the new pension scheme (NPS).

Thousands of Mumbai Municipal employees protest for old pension scheme, at Azad Maidan in Mumbai. (PTI)Premium
Thousands of Mumbai Municipal employees protest for old pension scheme, at Azad Maidan in Mumbai. (PTI)

Demand for restoration of the Old Pension Scheme is growing with each passing day as many employees in Maharashtra and Haryana went on strike on Tuesday seeking its return. Some non-BJP-ruled states including Rajasthan, Chhattisgarh, Jharkhand, Punjab, and Himachal Pradesh have already reverted to OPS and ditched the new pension scheme (NPS).

The central government on Tuesday said there is no provision in the PFRDA Act for a refund of the accumulated NPS corpus being sought by the five non-BJP states that want to restart the Old Pension Scheme.

Minister of State for Finance Bhagwat Karad also asserted that the Centre is not considering any proposal to restore the OPS in respect of the central government employees recruited after January 1, 2004.

Former RBI Governor Raghuram Rajan has expressed his concern regarding the OPS and said that restarting the old pension scheme would be an enormous obligation in the long run, adding, "less costly ways should be found to address the demands of government pensioners".

The former RBI governor said the old pension scheme does involve massive future outlays because of the indexation of pensions to current salaries.

He has advised state governments said the old pension scheme does involve massive future outlays because of the indexation of pensions to current salaries.

What is Old Pension Scheme? 

Old Pension Scheme (OPS) is a retirement scheme approved by the central government which provides a monthly pension to the beneficiaries till the end of their life service. Under this, the amount of monthly pension is equal to half of the last salary drawn by an individual.

What is New Pension Scheme? 

New Pension Scheme (NPS) is the latest retirement scheme in which the beneficiaries will be able to withdraw 60% of the amount invested after retirement.

It was introduced by the central government in December 2003 to replace the defined benefit pension system with defined contribution pension scheme in order to provide old age income security in a fiscally sustainable manner and also to channelize small savings into productive sectors of the economy through prudential investments.

It was made mandatory for all new recruits to the Government service (except armed forces) with effect from January 1, 2004, and has also been rolled out for all citizens with effect from May 1,2009, on voluntary basis.

Why employees are protesting against NPS?

Under Old Pension Scheme (OPS), the pension amount is provided by the government, which increases its liability, whereas the NPS has a contributory mechanism from the employee as well as the government.

Lakhs of employees of the Maharashtra government went on strike on Tuesday seeking restoration of the Old Pension Scheme. From sanitation workers to teachers, from paramedics at hospitals to other government staff, everyone has joined the strike for the implementation of the old pension scheme. They raised slogans like, "Only one mission, restore old pension".

Maharashtra Chief Minister Eknath Shinde on Tuesday urged state government staffers, who have gone on an indefinite strike seeking restoration of the Old Pension Scheme (OPS), to call off their agitation, stressing that the government was positive and sympathetic about their demand.

Earlier this month, the Central government allowed select employees to opt for OPS. The Ministry of Personnel in its order said that the employees who joined the central government services against posts advertised or notified before December 22, 2003, the day National Pension System (NPS) was notified, are eligible to join the old pension scheme under the Central Civil Services (Pension) Rules, 1972 (now 2021).

The select group of government servants can opt for this option by August 31, 2023. This month, government employees in Karnataka withdrew their indefinite strike after the state government announced a 17% hike in basic salary.

The employees had demanded interim relief of a 40% increase in basic salary and revision of salaries as per the 7th Pay Commission.

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Published: 15 Mar 2023, 09:26 AM IST
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