NPS ‘Failure’ Providing Socio-Economic Protection ?

What was just a gentle tweet, now turned into a sea roar. Lakhs of central government and state government employees recently gathered at Delhi’s Ramlila Maidan and demanded the return of the old pension system. 

This country has not seen such large-scale organized protests by government employees in recent times

Pension, an important vested right of employees, is an important safeguard in the discharge of the government’s socio-economic responsibilities towards employees. 

The highest courts of the country have also recognized the right of employees to pension security at various times. In a case (DS Nakara v. Central Government, 1982) the Supreme Court observed in its judgment that pension is not just a reward for work, it is socio-economic justice.

Two decades of continuous protests against the New Pension Scheme (NPS) have now turned the tide. Jharkhand, Chhattisgarh, Rajasthan, Himachal Pradesh and Punjab have announced to bring back the old pension system. 

The Second National Judicial Pay Commission, in its February 2020 report, recommended not to introduce NPS in respect of employees connected with the judiciary. 

Central audit body CAG in a 2018 report termed NPS as a ‘failure’ in providing socio-economic protection. The National Human Rights Commission, on 20 December 2021, asked the Center to constitute a committee to review the NPS.

According to Article 309 of the Constitution, the Government is the model employer whose employee protection regulations shall be the model to be followed by all workplaces.

 A secure, well-organized pension system was created in compliance with that constitutional mandate. In 2004, it was replaced by the ‘Corpus Based Pension’ system. 

As a result, the pension amount of the employees is no longer guaranteed, depending on the fluctuations of the stock market. A certain amount (10 percent) is deducted from the employee’s salary every month as before, but the post-retirement monthly pension is uncertain. 

Many employees are getting pension of less than five thousand rupees in this market based pension system. This uncertainty angers the larger employee community, most of whom are Group C, Group D workers.

In the old pension system, the pension of the employees was determined on the basis of basic retirement pay and dearness allowance. 

Full pension would be given only after twenty years of service. Pension would increase in line with inflation. There was scope for family pension, special gratuity in case of death while working. 

There was also a provision to receive a lump sum in lieu of some reduction in pension. The new pension system has taken away all these benefits from the employees. Workers are angry at the loss, especially as pensions are not linked to inflation.

Under pressure from the ongoing agitation, the central government brought in some changes — bringing back the death come gratuity system in 2016, increasing the government’s contribution to the employee pension fund from 10 per cent to 14 per cent from April 2019. 

However, NPS has not regained the confidence of workers due to uncertainty and lack of transparency. 

For many years after the introduction of NPS in many states, no money was deducted from employees’ salaries for pension funds, nor was the government’s share deposited. No pension investment fund was created. 

As a result those employees will get less pension after retirement.

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