Scrap the New Pension Scheme

Confederation of central government employees and workers |  explanatory note on demands

POINT NO.14

Scrap the New Pension Scheme

The defined benefit scheme of pension was introduced replacing the then existing contributory system decades back. .  The Government decided to reconvert the same into a contributory scheme on the specious plea that the outflow on pension had been increasing year by year and is likely to cross the wage bill. By making it contributory, the Government expenditure on this score is not likely to get reduced for the next  four decades  because of the reason that as per the announced scheme, the Government is to contribute the same amount to the fund as the employees make. Coupled with this stipulation the Government is also duty bound to make payment for the existing pensioners and for all Central Government employees who were in service prior to 1.1.2004.  The contribution collected from the employees who are recruited after 1.1.2004 is to be managed by a mutual fund operator for investment in the stock market.  It is the vagaries of the stock market which will then determine the quantum of pension or in other words annuity, which would not be cost indexed.   Before the introduction of the new scheme and the PFRDA bill, the Government had set up a committee under the chairmanship of Shri Bhattacharya, the then Chief Secretary of the State of Karnataka. The bill was unfortunately drafted and presented to the Parliament disregarding even the recommendation of the said committee to the effect that the Govt. should consider introducing a hybrid system by which the employees will have either a defined benefit pension   or  opt for a higher return through stock exchange investments.  Despite the non-passage of the bill and the consequent absence of a valid law to support the Pension Regulatory authority, the Govt. converted the existing pension scheme into a contributory one through executive fiat and invested a percentage of the fund so generated from the employees’ contribution in the Stock market.   India is a young country and the expenditure on statutory pension has remained over a long period not more than 5% of GDP which the country/Government can afford to spend. The withdrawal of PFRDA bill is required for the following  solid reasons:

(a)    The new pension scheme is going to make social security in old age uncertain and dependent on market forces.

(b)   The scheme has been compulsorily imposed on a section of employees and hence it is discriminatory.

(c)    Such scheme had been a failure in many countries including Chile, UK and even USA.  In USA entire pension wealth has been wiped out leaving pensioners with no pension. In Argentina the contributory scheme which was introduced at the instance of IMF was replaced with the defined benefit pension scheme.

(d)   The PFRDA Bill has provisions empowering the Govt. and the Authority to cover employees now left out and to amend the existing entitlements of pension benefits.

(e)   In majority of the countries, "pay as you go" is the system of pension.         

(f)     The contributory scheme does not give any guarantee for a minimum pension of 50% of the pay drawn at the time of retirement of the employee. Nor does it provide for  the protection of his family members in the form of family pension in the event of death.

The Supreme Court had declared pension as one of the fundamental rights. The government should therefore retrace from its avowed position, which is detrimental to the interest of the employees and ensure that the employees recruited after 1.1.2004 is covered by the existing statutory defined benefit scheme and withdraw the PFRDA bill from the Parliament.

The recent decision of the Cabinet to allow FDI in pension fund operations has made the real intent of the PFRDA bill unambiguously clear. The FDI will facilitate the mutual fund operators to invest the funds outside India thereby making Indian Savings available for development of a foreign country. It is now clear that the decision behind the contributory pension scheme was the pressure imposed by imperialist powers and more specifically IMF.  It has, therefore, to be opposed at all cost and with vehemence.  The Govt. must not be allowed to go ahead with its intention of induction of FDI in pension fund companies.  The one day strike on 12th December, 2012 must be seen as a beginning of the sustained and incessant struggles in the days to come.

SOURCE- http://confederationhq.blogspotin/