Citizens' Issues
Introduction of Contributory Pension Scheme in Kerala

The Kerala government, earlier this month, replaced the “Defined benefit based” pension scheme by the “Defined contribution based” pension scheme. State government employees went on a six-day strike to protest against the new scheme, which was introduced without taking the employees’ views into consideration

The six-day old strike by state government staff and teachers in Kerala, which was called off on 14th January, was the first serious agitation against replacement of the “Defined benefit based” pension scheme in government service by the “Defined contribution based” pension scheme, through the back door. As all strikes so far by government employees in India, the calling off was just a face-saving compromise, without much result to report home. Still, the issues the strike successfully brought to surface and the eagerness of the state government to somehow get back the employees for work, makes the six-day strike a cause for a re-look at the New Pension System. It was introduced by the Centre for central government employees, excluding majority of defence employees from 2004, legislative support for which is still ‘hanging’. Kerala finance minister KM Mani reportedly had negotiations with employees’ representatives till 12.40am on 13th January night which was followed with a wrap-up discussion between employees’ leaders and chief minister Oomen Chandy which lasted till 1.40am the next day.

 

What ails the New Pension Scheme?

 

There was broad understanding between the government and employees on the following:

  • The Contributory Pension Scheme (CPS) will be applicable only to employees joining service from 1 April 2013.
  • There will be arrangements to look into the problems that arise on implementation of the CPS.
  • The problems of employees with low emoluments and short service period will be examined.
  • The Parliamentary Standing Committee has recommended guarantee of minimum pension to be not less than that eligible under EPF Pension scheme.
  • When central regulations are in place, there will be a provision to guarantee the minimum pension.
  • The state government will approach the PFRDA (Pension Fund Regulatory and Development Authority) to include the State Treasury Deposit as an eligible avenue for depositing pension funds.
  • It will be clarified in the new notification that employees in service up to 31 March 2013 will be eligible for statutory pension under the existing regulations.
  • There will not be any disciplinary action for having participated in the strike.
     

NPS throws great opportunity for insurers: PFRDA

 

Whatever be the arguments in defence of the CPS, a time-tested social security arrangement, available to a section of employees, is being dismantled without any credible alternative system in place. When one refers to social security arrangement, one has in mind all pensionary benefits including family pension. While in the private sector and profit-making public sector undertakings, employees have an opportunity to bargain and settle remunerations based on their skill and market realities, government employees and those employed in quasi-government and statutory bodies are a helpless lot, whose bargaining power is stifled in the name of public interest. It is in this context that they deserve special treatment, at least in respect of social security arrangements like pensionary benefits. The cost savings for the Government of Kerala, if any, will accrue only from the date of retirement of the first employee who joins after 31 March 2013. Till such time, there will be an additional outgo to the extent of the employer’s contribution to the fund in respect of employees joining service from 1 April 2013.

 

As for the central scheme, NPS has not been made applicable to defence employees who constitute a major proportion of central government employees.

 

To access other articles by MG Warrier, please click here.

 

(MG Warrier is a freelancer based in Thiruvananthapuram.)

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COMMENTS

M G WARRIER

4 years ago

Let us have clarity on government’s financial burden issue.
VI Pay Commission noted that the New Pension Scheme implemented for civilian employees recruited on or after 1-1-2004would start yielding benefits only after another three decades. The Commission made the following observation about pension funding:
“In case, however, the Government wants to create a pension fund to discharge their pension liability, the study by Institute for Social and Economic Change (Bangalore) reveals that the net present value of the projected pension liability is Rs3,35,628 crore based on assumed rate of return of 8 per cent.”
NPS will not help reduce this liability. On the other hand, NPS increases the outflow on wage bills in respect of new recruits from the effective date of NPS by 10 per cent (Govt contribution) and further possible demands for higher differential wages in lieu of pension enjoyed by those joined earlier. These arguments mutatis mutandis will hold good for Kerala.
I am not commenting on the US experience in the absence of more details about wage structure there and government’s responsibility there to fund the pension scheme of erstwhile auto majors in US referred in the comment.

REPLY

sivaraman anant narayan

In Reply to M G WARRIER 4 years ago

The reference to US auto majors was in the context of how defined benefit schemes have become unviable for the managements to fund in the long run. There is no mention of govt funding of such pvt sector pension schemes.
The move by the centre and state govts to move to NPS is to reduce the long term future liabilities of the pension of new employees, which will be contribution driven and not benefit driven.My understanding is, the move was not to reduce current liability of existing employees which have already accrued.

sivaraman anant narayan

4 years ago

Given the precarious state of the State Govt.'s financial position it has no alternative but to revert to contributory pension scheme from a benefit defined pension scheme. World over defined pension schemes are under funded and have become one of the causes of sickness of the erstwhile auto majors in the US.

SEBI’s vague record of meeting with investor associations

According to VK Jain, president of the Midas Touch Investors Association, the minutes of the Investors’ Association meeting held on 21st December does not reflect the deliberations held, as it omits reporting of important matters and specific issues raised by IAs and the response from SEBI officials

As written by Moneylife, the attitude of the Securities & Exchange Board of India (SEBI) towards investors is best reflected in the shoddy manner in which it conducted a meeting with representatives of accredited investor associations (IAs) on 21 December 2012. Now what has come as a shocker is that the minutes of the meeting are elusive on important issues raised by IAs and replies provided by SEBI officials.

 

According to VK Jain, president of the Midas Touch Investors Association, the minutes of the meeting does not include important matters and specific issues raised by IA representatives.

 

It looks as if the minutes mention only issues that were discussed in the presence of SEBI chairman UK Sinha. Issues discussed after Mr Sinha left the meeting are rounded off in just one sentence. Here are the issues that were on the agenda...

 

Item No. 3 Application of Regulation 69 of the SEBI (Collective Investment Scheme) Regulations, 1999

Item No. 4 Penalty on audit firms and compensation to small investors

Item No. 5 Penalty structure for brokers and sub brokers (authorized persons) not to be identical

Item No. 6 Considering establishment of uniform listing agreement for all exchanges

Item No. 7 Issues relating to independent directors

Item No. 8 Redressal of investor complaints

Item No. 9 Any other item with permission of chair

 

And here is what SEBI says about it in the minutes... “Item No. 3 to 9 was discussed during the meeting and it was assured that the respective departments of SEBI would look into these items.”

 

We are wondering which respective department of SEBI would look into point no.9!

 

You may want to read details of the meeting that reflects how SEBI treats investor associations here

 

Here are the minutes sent by SEBI...

 

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