NEW PENSION SCHEME

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The employees and officers who joined the banking industry on or after

th 01.04.2010 should be governed by the original pension settlement signed on 29

October 1993 and Gazetted in the year 1995.

The seventh pay commission has recommended as below.

Pension has been one of the key Terms of Reference (TORs) for successive Pay

Commissions. While the VI CPC was the first Pay Commission to have been

constituted after the introduction of the National Pension System (NPS) which

came into effect on 01.01.2004, the VII CPC is the first one to be constituted after

some experience has been gained on this count. Pension Related TOR of the

Commission. The TOR of the present Commission – to examine the principles

which should govern the structure of pension and other retirement benefits,

keeping in view that retirement benefits of all Central Government employees

appointed on and after 01.01.2004 are covered by the National Pension System

(NPS)–limits the mandate of this Commission only to the Old Pension System

(OPS). However, during its interaction with staff associations and other

stakeholders, the Commission received many grievances/suggestions relating to

both the OPS and the NPS. It has also been averred, inter alia, that NPS is proving

to be an impediment in attracting and subsequently retaining the best talent for

the Central Civil Services/All India Services (AIS). In this backdrop, the

Commission decided to address the grievances related to NPS, which have been

discussed in this chapter. Issues relating to OPS and other retirement benefits

have been dealt in Chapter 10.1 and Chapter 10.2.

NPS Background – The Commission notes that the NPS is the culmination of a

series of social security and pension related reform initiatives in India. As in many

other countries, pension reforms in India were driven by the fiscal constraints of

supporting a public pension system and the longer-term problems of an ageing

population. Government of India, in 1998, set up the Committee for Old Age

Social and Income Security (OASIS). The OASIS committee concluded, among

other things, that the Defined Benefit Scheme (DBS), serving the Central

Government retirees, is unaffordable for government and it should be replaced by

a Defined Contribution Scheme (DCS). The Commission notes that the total

pension liability on account of Central Government employees had risen from 0.6

percent of GDP (at constant prices) in 1993-94 to 1.66 percent of GDP (at

constant prices) in 2002-03. Pension expenditure of the Central Government grew

at a compound annual growth rate (CAGR) of 21 percent during the period 1990

to 2001. This was also reflected in the increasing fiscal deficits. Further, in the

DBS, pensions were wage indexed, and thus the outgo on this account would have

increased manifold. The stressed fiscal situation, thus, set the stage for

introduction of the NPS in India. The Bhattacharya Committee Report of the

Seventh CPC 422 Index Report (HLE Group on NPS) (Feb 2002) recommended

that an unfunded Defined Benefit (DB), Pay As You Go (PAYG) scheme or a pure

Defined Contribution (DC) scheme would not be suitable and therefore

recommended a hybrid DB/DC scheme to meet the requirements of central civil

servants.

 

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