Reversion to old Pension Scheme

Reversion to old Pension Scheme

GOVERNMENT OF INDIA
MINISTRY OF FINANCE
RAJYA SABHA
QUESTION NO 74
ANSWERED ON 24.07.2018

Reversion to old Pension Scheme

74 Shri V. Vijayasai Reddy

Will the Minister of FINANCE be pleased to state :-

(a)the reasons for removing Pension Scheme from April 2003;

(b)whether the employees who had joined after 2003 are demanding to revert back to the old Pension Scheme since they virtually get nothing after their retirement in the new Pension Scheme;

(c)whether these employees, after retirement, do not get whatever they contributed and the matching amount of Government in the scheme, since 40 per cent of it has to be mandatorily invested in an annuity scheme of authorised insurance company and the returns are dependent on market forces; and

(d)what constraints Government has to revert back to the old Pension Scheme?

ANSWER

The Minister of Finance

(a) to (d) A Statement is laid on the Table of the House.

STATEMENT OF RAJYA SABHA STARRED
QUESTION NO. 74 REGARDING
“REVERSION TO OLD PENSION SCHEME”
RAISED BY SHRI V. VIJAYASAI REDDY,
TO BE ANSWERED ON 24.07.2018.

(a) to (d) Government has made a conscious move to shift from the defined benefit pension scheme to defined contribution pension scheme i.e. National Pension System (NPS) due to rising and unsustainable pension bill.
Representations have been received which inter alia also include the demand that the Government may revert to old defined benefit pension system.

NPS is a well designed pension system. The pension wealth which includes both employee and Government contribution accumulates over a period of time till retirement. It grows with a compounding effect and is paid to the subscriber in the form of lump sum withdrawal and annuity. As per the provisions of Government notification dated 22.12.2003 and Section 20(2)(i) of the PFRDA Act, 2013, it is mandated that a subscriber is required to purchase an annuity of a specified percentage from a life insurance company, for provision of monthly pension, besides being permitted to withdraw certain part of accumulated pension wealth as lump sum withdrawal.

Due to rising and unsustainable pension bill and competing claims on the fiscal, there is no proposal to replace the NPS with old pension scheme in respect of Central Government employees recruited on or after 01.01.2004.

Source: Rajya Sabha