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The Indian government's recent approval of the Unified Pension Scheme (UPS) marks a significant shift in the country's approach to government employee retirement benefits. This move, effectively replacing the New Pension Scheme (NPS) with a system closer to the Old Pension Scheme (OPS), represents a triumph for the opposition, which had vehemently campaigned for guaranteed pension provisions. The UPS promises a blend of contributions and a secure pension for government employees after they retire, offering them much-needed social security in their later years.
The genesis of the UPS lies in the widespread dissatisfaction among government employees with the NPS. They argued that the NPS, a purely contributory scheme introduced in 2004, often resulted in meager pension payouts, particularly for those who had served for several years. The protests, fueled by concerns about financial uncertainty in retirement, gained momentum in 2020-21, culminating in a demand for the reinstatement of the OPS, which guaranteed a substantial pension based on their final salary. The ruling Bharatiya Janata Party (BJP) initially resisted this demand, citing concerns about the financial burden on the exchequer.
However, the opposition, led by the Congress party, saw merit in the employees' call for a guaranteed pension, recognizing its crucial role in ensuring social security after retirement. The Congress-led government in Rajasthan took a bold step in 2022 by reintroducing the OPS, effectively reversing the 20-year-old reform implemented by the Atal Bihari Vajpayee government. This move triggered a domino effect, with other opposition-ruled states, including Tamil Nadu, Kerala, Jharkhand, Chhattisgarh, and Punjab, also reverting to the OPS. The Congress even capitalized on the issue in the 2022 Himachal Pradesh assembly elections, promising the OPS, which proved to be a significant factor in their victory. This trend solidified the belief that the OPS promise held substantial appeal to government employees, traditionally considered BJP supporters.
The mounting pressure from government employees and the growing support for guaranteed pensions within the BJP itself forced the central government to take action. In March 2023, a committee was appointed, headed by Cabinet Secretary-designate T.V. Somanathan, to review the NPS. The committee's recommendation, the UPS, is essentially based on the Guaranteed Pension Scheme (GPS) implemented by the YSRCP-led Andhra Pradesh government. The UPS is a contributory scheme, requiring both employees and the government to contribute a percentage of their salaries. However, it assures a guaranteed pension to the retirees and their dependents, along with regular dearness relief hikes, a family pension, and a lump sum superannuation payout.
The UPS, set to take effect from April 1, 2025, will provide employees with a minimum pension of ₹10,000 a month after 10 years of service, while those joining after 2004 can choose to opt for the UPS over the NPS. The decision to introduce the UPS, widely perceived as a moral victory for the opposition, marks a significant shift in the government's approach to pension benefits. It reflects a recognition of the importance of ensuring financial security for government employees in their post-retirement years. The success of the UPS, however, will depend on the government's commitment to its provisions and its ability to manage the associated financial implications.
While the introduction of the UPS can be seen as a positive step for government employees, it is important to note that the opposition's relentless advocacy on this issue played a crucial role. The Congress party, in particular, capitalized on the public sentiment regarding guaranteed pensions, turning it into a key political plank. This strategy proved effective, as the demand for assured pensions resonated strongly with voters, even influencing some BJP leaders to voice their support. The decision to implement the UPS is thus not just a policy change but also a testament to the power of public pressure and the political landscape's response to societal demands.
Source: Ecostani | Unified Pension Scheme, a moral victory for the Opposition