OPS isn’t sustainable, all states taken into confidence before amending pension model: Professor Manoj Pandey

Greater Noida (03/06/2022): In order to create awareness and eradicate confusion, Dr Rudresh Pandey, Director, GNIOT MBA Institute, held a detailed discussion on decoding OPS Vs NPS debate. He was joined by expert speaker and senior professor at BIMTECH (Birla Institute of Management Technology), Manoj Kumar Pandey.

Dr Rudresh Pandey began by outlining the salient aspects of NPS and how it became a political issue even during election. Thereafter he invited Professor Manoj Pandey to talk about the concept of pension and what’s the difference between provisions of OPS and NPS.

Professor Manoj said, “Any country tries to protect the right of its citizens to live in a dignified way even after their productive years. And that is where the concept of pension comes into play, which has been in existence since the time of Britishers. Different acts and provisions were brought from time to time to insure income for people even after retirement.”

Talking about the previously popular OPS, he added, “Old Pension System was that after your retire you will get half of your salary as pension. This was applicable only for government employees and government had to bear financial burden for the same. Gradually, the life expectancy as well as number of government employees kept on increasing and there came a time when government realized that this burden of pension is becoming unsustainable and can’t continue in this format forever.”

“It is thereafter a new concept was introduced where both employer and employee save a certain amount that goes to a corpus fund, interest is added into it and this same fund is used to pay for pension of the employee. This is at the core of National Pension System, which was brought into existence during AB Vajpayee government in 2004,” he elaborated.

Further outlining why it is important to accept and follow this new concept, he added, “Around 88 percent people work in informal sector, where there is no guarantee of EPF. Only 12 percent work in formal sector among that too only 4 percent are working in government. Why should four per cent of people enjoy from the taxes of remaining people?”

He also felt that NPS hasn’t been promoted in right manner and hence it isn’t much popular. “What is seen is sold,” he added.
Talking about the discontent with NPS, he said that, “The discontent is mainly because of comparison being made by people between the two systems. This is a valid concern since people are actually getting less income. When it was brought the interest rate used to be 12% now the interest rate is just eight percent. In the market it is seven percent. That is why people are talking of returning to old pension scheme.”

Talking about the mechanism of working of NPS said, “In NPS, along with salarythe employer deposits an amount same as deposited by the employee fixed amount. The contribution of these two parties is taken care by a third party –PFRDA (Pension Fund Regulatory and Development Authority). This money then goes to trust and is spent by trust in the capital market. From there, a corpus is developed. The pension would be provided from this corpus only. The responsibility of providing pension rests with NPS. There is no provision of DA in NPS. This is fixed.”

He also gave suggestion to plan a better life post retirement. “The main focus should be on having a greater corpus. For a young person he can opt for NPS as well as long term mutual fund. If planned well sufficient amount would be there. Keep some money in hand and give some money to the insurance company if possible.”

It must be noted that the Issue of OPS was one of the point of discussion in Uttar Pradesh assembly polls. The SP (Samajwadi Party) had promised to bring back the Old Pension Scheme in its poll manifesto. Recently the state of Rajasthan also announced going back to Old Pension Scheme.