Several political parties like Congress and Aam Aadmi party are providing the proposal of switching back to the old age pension scheme as an agenda to fight their elections. Several states like Rajasthan Chhattisgarh have already switched to the old annuity scheme.
What is this scheme?
As the name suggests, it is a scheme that provides social security in the form of allowance payments to the old population. Under it, the annuity of the Government employees was fixed at 50% of the last drawn basic pay. It created a payment liability for the government.
Thus, it was replaced by the National Pension scheme that was enforced from January 1, 2004, laying the promise of an assured or defined benefit to the retiree.
Reason for discontinuing the old age pension scheme –
This old-age pension scheme was creating an additional burden and financial expenses for the government.
The old age allowance scheme assured lifelong income post-retirement and an assured amount as high as equal to 50% of the last salary. Moreover, after the death of the pensioner, there’s spouses were entitled to a portion of the allowance.
This was creating excessive pressure on the expenditure of the government.Â
It creates an intergenerational equity issue where the present backstairs is paying for the allowance bill of those who join government service before 2004 but as well as are contributing 10% of their basic pay and dearness allowance under the National annuity Scheme.
What is National Pension Scheme?
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Therefore, looking at the above situation the government came out with the National Pension Scheme (NPS) in 2004 under which all citizens between the age group of 18 to 70 years can join it.
It is a participatory scheme where both the government and the employee contribution towards the allowance. Under the National Pension Scheme, the employee requires to deposit 10% of the basic pay along with a dearness allowance.
Read Also: The expanding purview of EPFO – Pension for all
The old-age allowance scheme is used as a political tool to fight elections however it is largely unsustainable and a sign of bad politics.
Therefore, the right approach for political parties would be to fight elections on the grounds of solving the issues present with the National allowance Scheme that may lead to an inclusive and equitable allowance infrastructure.
