TWO MONTHS after Chief Minister Bhagwant Mann announced that Punjab would be reverting to the Old Pension Scheme (OPS), the Cabinet Friday approved its implementation, days before the first phase of Assembly elections in Gujarat on December 1.
The state government is preparing to issue a notification, Mann told newspersons after the Cabinet meeting. Sources in the government said a draft notification was cleared by the Cabinet, but would be issued only after the minutes of the meeting are sent to departments concerned.
The move, government sources, said would benefit over 1.75 lakh employees currently covered under New Pension Scheme (NPS). The state would also request the Pension Fund Regulatory and Development Authority to refund Rs 16,746 crore, the corpus accumulated under the NPS.
Punjab’s finances do not paint a rosy picture. The state’s pension bill in 2004-05 was just Rs 1,514 crore. The Budget for 2022-23 estimates the total outgo due to pension in the year at Rs 15,146 crore, which is 10 times the liability in 2004-05. Pension and salaries are estimated to be 49 per cent of its total revenue receipts in the current financial year, restricting scope for developmental expenditure in the state.
Under the old pension scheme, retirees get an assured 50 per cent of their last drawn basic salary, with cost of living adjustments made to their incomes every year. Over 4,100 employees will benefit in the next five years following the switch, sources said. To ensure the switchover is financially sustainable, the state would create a pension corpus and proactively contribute Rs 1,000 crore a year to begin with, they said.
Though the AAP announced the plan to revert to OPS two months back, a delay in issuing the notification had pitted the government against its employees. The Contributory Pension Fund Employees’ Union (CPFEU) of Punjab had announced two days ago it would organise a Poll Khol rally against the government in election-bound Gujarat. The notification, expected later in the evening, is also an attempt to assuage the CPFEU.
Under the old pension scheme, retirees get an assured 50 per cent of their last drawn basic salary, with cost of living adjustments made to their incomes every year. Over 4,100 employees will benefit in the next five years following the switch, sources said. To ensure the switchover is financially sustainable, the state would create a pension corpus and proactively contribute Rs 1,000 crore a year to begin with, they said.
Though the AAP announced the plan to revert to OPS two months back, a delay in issuing the notification had pitted the government against its employees. The Contributory Pension Fund Employees’ Union (CPFEU) of Punjab had announced two days ago it would organise a Poll Khol rally against the government in election-bound Gujarat. The notification, expected later in the evening, is also an attempt to assuage the CPFEU.
Under NPS, an employee pays 10 per cent of her salary towards the defined contribution scheme; the government matches it by paying 14 per cent. While Punjab also demands the NPS corpus accumulated so far, the PFRDA had refused to refund the amount to Rajasthan and Chhattisgarh, the two Congress-ruled states which have also switched to the OPS.
The Punjab government initially did not want to take the risk, so it had been maintaining it would not be possible to pay Rs 18,000 crore (the corpus estimated to be accumulated under NPS) out of its pocket. It intended to take legal recourse to ensure the money is withdrawn.
Some economists, however, opposed the move to revert to the OPS and termed it a disaster. They pointed out that the fund is protected by a lock-in period and it cannot be withdrawn in advance without the approval of the pension regulator, PFRDA