Right to universal pension must be guaranteed

Government employees across the country are up in arms against the New Pension Scheme (NPS) that has been imposed on them. Employees of the central and state governments have demanded the scrapping of the NPS and bringing back the Old Pension Scheme (OPS). A federation of Central government employees’ unions has written to the Cabinet Secretary to restore the Old Pension Scheme (OPS), stating that the National Pension System (NPS) is a disaster for retiring employees in their old age.

The NPS for Central government employees was notified on 22 December 2003 and it was made mandatory for all new recruits joining government service from 1st January 2004. A majority of the state governments notified and adopted the NPS over the next ten years. However, the state governments of Chhattisgarh, Himachal Pradesh, Rajasthan and Punjab have reverted to the OPS over the past year, in the face of demands from their state government employees.

The opposition to the NPS is growing now as thousands of government employees who joined in 2004 or soon after, are just retiring and have begun to receive their monthly pension. They are very angry about the meagre monthly pension they are getting under the NPS.

Comparative Features of NPS and OPS

Feature NPS OPS
Scheme Administered and regulated by Pension Fund Regulatory and Development Authority. Started in 2004 for government employees and in May 2009 for others The Department of Pension & Pensioners’ Welfare administers the pension scheme for central govt.
Who can opt for this scheme? Compulsory for all government employees joining service after January 1, 2004. Private companies have the option to offer NPS in place of Employees Providend Fund (EPF). They can shift from EPF to NPS if employees agree. Cannot opt for it anymore after 1.1.2004
Pension type Defined contribution but benefits not defined. There is no minimum guaranteed pension.


No employee contribution,
defined benefit – 50% of last drawn salary

– minimum guaranteed pension 9000/-per month

Contributions Government employee contributes 10% of basic pay + DA and government contributes matching amount. Government contribution changed to 14% w.e.f. 01.04.2019.


No contribution from the employees
Pension fund The total amount collected is distributed to designated pension fund managers who invest this in some combination of equity, corporate bonds and government securities. The returns from the investment will constitute the employee’s post retirement income. There are no guaranteed returns on this investment.  If there is a share market crisis the investment is vulnerable to getting wiped out. Consolidated fund of government of India. Pension accounts for 2,32,000 crores out of total yearly government disbursements of 1, 03,21,000 crores (2020-21 budget estimate).

As the table here shows, the NPS is not a defined benefit scheme. This means the employee is not guaranteed a fixed percentage of his/her last salary. The monthly pension that a retired employee will get is vulnerable to market speculation. There is no provision for Dearness Allowance to compensate the price rise/inflation which was available in the OPS. The NPS does not guarantee a minimum monthly pension. In contrast, the OPS guaranteed minimum monthly pension of Rs.9000.

Despite all claims that have been put forward of a higher return on NPS because of investment in the share market, the experience has been that the retired employee receives a much lower monthly amount than under the OPS. For example, an official who retired with a basic pay of ₹30,500 received ₹2,417 as monthly pension as against the ₹15,250 pension he would have been given under the OPS. Likewise, many government employees who would have received close to Rs.20,000 per month under the OPS after 15 years of service are now receiving just a little more than Rs. 2500 per month.

There is an intense debate today on the merits and demerits of the NPS versus the OPS. The debate reflects the clash between two opposing outlooks.

One is the outlook of the bourgeoisie which regards pension paid to government and public sector workers as a drain on public expenditure. It views pensioners as parasites, denying the fact that they have contributed to creating the wealth of society during their working life.  At the same time, it demands that the government continue to hand out every kind of tax concession and incentive to the capitalists to enhance their profits at the expense of the public treasury.

The other is the outlook of the working class. According to this outlook, it is the government’s duty to pay a definite amount of pension to those who retire when they are no longer fit to work, after decades of working. Workers are demanding the return to the OPS on the basis that every worker has a right to an assured pension, defined as a percentage of his or her last salary drawn.

At present in India, workers in the private enterprises are not covered by any statutory pension scheme. Only government employees are covered under the statutory pension scheme. This means that just about 4 percent of all workers are statutorily covered by pension. Large sections of the working people in our country, who are not employed by the central or state governments, are not eligible to any pension or social security after retirement.

The government claims that through the NPS it is aiming to universalize pension, as even unorganized workers can be part of the NPS. This is fraudulent propaganda meant to fool the workers. The private employers do not have to contribute anything to the worker’s pension fund. The government will contribute nothing to it either. It will be contributed for entirely from the worker’s salary and will be mandatorily invested in the share market, to ensure profits for the financial speculators.

Workers, through their labour, contribute to society during the years they work. It is the duty of society to ensure that they are taken care of in their old age, or when they suffer injuries and are unable to work any longer. The state has to ensure that a portion of the surplus value extracted from the workers by the capitalists is taken back and put into a pension fund for workers. This must be in addition to the contribution of workers from their salaries. For workers who do not have fixed employers, like construction workers, the state must take up the responsibility of building a pension fund for their life after retirement. On no account must the pension funds of workers be invested in speculative activities.

The struggle for a defined-benefit universal pension scheme is entirely just. It is part of the struggle for a society that will be oriented towards the fulfilment of the needs of the working people, not the greed of the capitalists. In such a society, the state will be committed to provide a livelihood to each and every  adult, to ensure security of employment and a living wage during his/her working life and guarantee a defined and regular pension to every retired worker. Workers must organise to fight to establish such a society.

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