Yes, to OPS! No to Modified NPS!
The movement for a decent pension is assuming greater prominence and spreading fast all over the globe in the wake of, and as a fall out of implementation of neo liberal policies, a panacea discovered by the global capital to overcome the crisis in the post-Keynesian phase. The end of the concept of welfare state begun with the introduction of neo-liberal policies. The privatisation of social security including pension has further accentuated the pension crisis. The concept of pension as a defined benefit was put an end with the introduction of contributory one. The responsibility of social security as a whole, including pension, has befallen on the shoulders of workers themselves. The governments and employers are shrugging off their responsibility of old age care of their employees. Pension issue is nothing but an issue of poverty in old age.
Pension – A Political Issue
Unable to bear the pressure from the workers movement in the country and also to make a counter point against the BJP ruled Union Government, some of the non-BJP ruled states like Rajasthan, Chhattisgarh, Jharkhand, Punjab, and Himachal Pradesh, have decided to restore Old Pension Scheme (OPS). But, the Modi-led BJP government at the centre, through PFRDA (Pension Fund Regulatory and Development Authority), is creating obstacles to the process by refusing to return the money collected in the name of National Pension Scheme (NPS) from the same employees since 2004.
The issue of pension is not a fringe issue anymore and is snowballing into a major political issue in the run up to the Parliamentary elections in 2024. It was a major political issue in several assembly elections like UP and Himachal Pradesh too. Several political parties, barring BJP and few others, also made elections promises to restore OPS to fulfil the demand of the government employees’ movement. It is in this backdrop, the Finance Minister, in her last budget speech, announced a committee headed by the Finance Secretary to look into the issues of and possible improvements on NPS, which is contrary to the demand of the workers movement to restore OPS. There are speculations that the Modi-led BJP government may announce some improved NPS, mostly with relatively higher amount of pension, before assembly elections in four states including Rajasthan, Madhya Pradesh, Chhattisgarh, and Telangana. The government has already made its intention clear that it is not for restoring the OPS, but for some improvements in the existing scheme of NPS.
Neo-liberal Logic and Super Profit
In the backdrop of increased life span to 70 years in 2020 - compared to 32 years in 1947 - the demand for pension is also an attempt to overcome poverty in old age. The countries all over the world, guided by the neo-liberal economic philosophy, attempt to reduce the financial burden on the economy, due to pension, by increasing retirement age on the one hand and also by making it largely a contributory scheme. This is a socially irresponsible and unscientific approach adopted by the global capital driven by motive of super profit.
Growing old Age Population
The population in India is relatively younger now and is expected to grow older by 2050. There are estimates that suggest 30 percent of world population and roughly 20 percent of Indian population would grow older by 2050 to be dependent on pension. More than 50 lakh people are estimated to join the population of citizens above 60 years every year. In such a scenario, the question of pension is a live issue.
According to the National Sample Survey Office (NSSO) report, in 1961, about 5.6 percent of the total population of India was in the age group of 60 years and above, whereas in 2021, the proportion has increased to 10.1 percent. The Report of the Technical Group on ‘Population Projections for India and States – 2011’ says that there were nearly 13.8 crore elderly persons in India in 2021, and the population is expected to further increase to around 5.6 crore by 2031.
Pension is Not a Charity, But a Right
The government argues that old age population is a burden that can destabilise the economy. But, it does not say anything about its responsibility towards its own employees in their old age. The government is responsible to take care of the issues of old age of its employees. They are people who have spent their youth in the service of the country and the government. Hence, the government is bound to provide them a decent and dignified life in their old age. But unfortunately, the government is also driven by profit motives and is calling them a burden on the country and the people’s taxes.
The country's Supreme Court and the International Labour Organization (ILO) have clearly stated that the pension provided to employees is not a charity from the companies or the government, but it is their right. Pension is a benefit out of their own investment of labour. This cannot be denied or diverted elsewhere without their approval. Pension is that portion of an employee's salary that is unpaid to them while they were in service. Despite this, the government designed a contributory pension scheme replacing a defined benefit scheme that created an unsecured future for employees from 2004 and for the next generation. The government is denying their right and has forcefully snatched away the future of the employees.
OPS vs NPS : Benefit vs Contribution
NPS is applicable to employees who joined the government and public sector services from 2004. OPS assured a defined benefit of 50 percent of the last drawn salary to its employees. The labour they spent for the service until the age of 60 years was their investment and there was no separate contribution towards any pension fund. The pension was treated as a benefit and a fixed amount to its employees for the services they offered in their working age. The person retired with a last drawn salary of Rs. 30,000 per month was offered a pension of Rs. 15,000 each month, along with Dearness Allowance (DA) linked to inflation, which would amount to Rs. 20,000 per month (approximately). With this amount, a senior citizen can be saved of any poverty in old age.
But, NPS is a contributory scheme to which the employees on service since 2004 are to part with 10 percent of their salary, while the government is to pay 14 percent. In return, after their retirement, they get less than 10 percent of the annuity. This is also affected by various factors, including the amount deposited, vagaries of the financial market, number of years of service, etc.
NPS funds are managed by domestic and foreign fund managers. The money is circulated in speculative financial market. About 27 percent stakes of UTI are owned by a foreign financial company and differences on various issues have started coming to the fore. The returns of pension fund from share market varies and also faces losses which can leave a stubborn imprint on the final pay out as pension to individual employees. In case of bankruptcy of the fund management companies, the employees will have to bear the brunt of it. The government does not give any counter guarantee to employees, while the companies enjoy the same.
Essentially, the contribution under NPS is defined while the return from such contributions, in terms of pension, is undefined. NPS is designed to be paid proportional to the actual savings and accruals of each individual employees during the period of their service and do not take care of their needs and problems after retirement. In several cases of NPS, we also witness employees drawing a monthly pension of not more than Rs. 1,000 or Rs. 2,000. Till February 2022, there were 22.74 lakh Central Government employees and 55.44 lakh State government employees enrolled under the NPS.
The government employees, particularly the young generation, are the worst affected because of their future retired life. Especially, in the backdrop of meagre pension under NPS. The demand for restoration of OPS is nothing but a demand to mitigate poverty in their old, “unproductive” age. It is a demand for a pension of 50 percent of last drawn wages along with DA to compensate for the rising inflation. The workers who joined service after 2003 form the backbone of the present phase of the movement to restore OPS. The government is bound to face the music if it refuses to listen to the demand of young workers.
Employees’ Pension Scheme (EPS)
Another pension scheme under Provident fund (PF) covers mainly the workers of private sector who draw wages up to Rs. 15,000. They pay some 12 percent of their wages towards PF and the employer pays an equal amount to their account. Out of a total contribution of 24 percent by workers and the management, 8.33 percent goes to the pension fund while the remaining is returned with interest at the time of retirement of the worker. In the final analysis, we find that a vast majority is receiving only the minimum pension of Rs. 1,000 and they struggle to overcome poverty in their old age. The government has no plan to increase their pension to lead a decent and dignified life.
Atal Pension Yojana (APY)
Atal Pension Yojana was introduced assuring Rs. 1,000 to Rs. 5,000 as pension per month. To cover the unorganised workers from informal sector, the assurance of pension stood in multiples of 1,000 depending on the contribution. Workers between 18 years and 39 years are allowed to join the scheme and are expected to contribute monthly towards pension for not less than 20 years. A worker of the age of 40 and above is not eligible for the scheme. If one opts for a pension of Rs. 5,000, s/he is to pay Rs. 210 (18-year-old contributor for 42 years) to Rs. 1,318 (39-year-old contributor for 21 years) per month. NPS – Lite is another scheme aimed at covering the same section.
The contributors under these schemes rose to 1.57 crores as of July 2018. Still, it stands at a miniscule 4 percent, out of a total of 39.14 crore (2011 census) unorganised workforce in the country.
Poverty While at Work
The alarming increase in informality of workforce to the tune of 93 percent in the country, which does not have a secured or better jobs and wages to pay for their future pension is a matter of grave concern. This issue can be addressed only by resolving problems of indecent wages and rising unemployment and thereby, poverty of the working people in the country. Under-employment is a major problem confronted by unorganised workforce. The problem of pension – social, benefit or contributory – cannot be resolved unless the government addresses the fundamental problems as mentioned above. Only a strategy to mitigate poverty during the working age can be an answer to poverty in old, pensionable age. The capital – both domestic and global – failed to address the fundamental problem to make the country and people prosper.
Modi led BJP government claims that they have extended pension to unorganised sector workers. But, the pension being offered under all these schemes do not extend beyond few thousands, mostly a thousand only, which is much below the level for leading any decent life for any individual human being in the country.
On the other hand, the responsibility for providing social security is not on the employers or the government, but is bestowed on each and every worker themselves with the introduction of the Social Security Code that is awaiting implementation.
The problem of pension is intricately linked to the level of poverty, unemployment, and wages in the country, which impacts the lives of individual workers in its own way. Social pension to bear the minimum level of pension to each worker does not have any replacement. There are several studies and research which acknowledge the progressive role of the system of social pension in the development of the country, economy and in the lives of individual pensioners, if properly strategized by the governments.
The government should necessarily plan to bear the old age welfare of workers in their non-working age. Putting the burden on workers only increase the pressure on the economic well-being of the country’s economy, unless a decent pension is guaranteed by the government to lead a dignified life.
Global Pension Index
The track record of India on this score is very poor. Mercer and CFA Institute released its 14th annual Mercer CFA Institute Global Pension Index (MCGPI) covering 44 countries in October 2022. Iceland topped the list, while Thailand was the lowest. India ranked the 41st, one of the lowest, among 44 countries. Iceland (1), Netherland (2), Denmark (3), Israel (4) and Finland (5) were the top 5 while Turkey (40), India (41), Argentina (42), Philippines (43) and Thailand (44) were the lowest 5.
The ‘Global Pension Assets Study 2023’ conducted by WTW and Thinking Ahead Institute says that seven largest markets, including Australia, Canada, Japan, Netherlands, Switzerland, UK and US, comprise 92 percent of the total pension assets in the world. Pension markets are concentrated in these seven largest markets and the global capital is planning to expand and penetrate the remaining pension markets. Hence, the pension reforms across the world, including India, is focussed on accumulating pension capital and thereby expanding the pension markets. Asian and African countries figure on the top priority list. Modi government’s attempt to bring in vast majority of unorganised workforce into the pension and other social security net is aimed at building a financial infrastructure by accumulating capital using the hard earned small savings of the unorganised workforce in the country, while euphemistically claiming to extend pension to all. Social Security Code is nothing but a tool to accumulate capital using the unorganised workforce to benefit the rich and the powerful.
Rising Waves of Struggles
Pension reforms is a major issue being confronted by the working class today. Very recently, violent protests by lakhs of workers in France erupted against the increase in retirement age and decrease of benefits granted. Entire Europe is restless on this issue of pension.
In India too, we are witnessing a series of struggles by various platforms against the NPS and for the restoration of OPS. The National Movement for OPS (NMOPS), including FANPSR (Front Against NPS in Railways), which has been a pioneer of pension struggle for some years, has declared a massive protest in Delhi on 1st October and has begun its yatra from Champaran in Bihar. The IREF (Indian railway Employees Federation), an alternative left federation of railway employees has also thrown its weight behind the NMOPS. The platform of recognised unions of the Central and State Government employees, despite being a late entrant into the movement, held a massive rally on 10th August in Delhi to emphasise their demand under the banner of JFROPS (Joint Forum for Restoration of OPS).
EPS pensioners organisations are also gearing up towards a day’s strike soon in coordination with and coinciding with the call of an all India strike by central trade unions of the country. Rail and road picketing are proposed to be organised in December 2023. Pension movement is rising steadily in the country.
The days are not far off when a vast majority of movements demanding pension converge at a point where Modi will be defeated in the 2024 elections to secure a future with decent pension and dignified life for senior citizens across the country. n