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| Bank staff may have to bear 25% of pension cost |
| Abhijit Lele & Sidhartha / Mumbai May 13, 2009, 00:03 IST |
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As part of wage settlement, new recruits will be asked to shift to the New Pension Scheme.
Over 250,000 public sector bank employees may have to bear at least 25 per cent of the cost of the second pension option that will be given to them as part of the wage settlement which is being negotiated.
Sources involved with the exercise said that the public sector banks and the unions have agreed on a second pension option that is estimated to cost around Rs 6,000 crore, but the extent of burden that is to be shared is being negotiated.
While the banks are pushing for the employees to bear 50 per cent of the cost, the unions are insisting that only 25 per cent of the cost be passed onto them. The sharing formula is expected to be thrashed out over the next few weeks, along with the final wage settlement.
In addition, around 60,000 retired bank employees will also be covered by a section of the plan, which is estimated to cost around Rs 4,200 crore. Of this, nearly Rs 3,000 crore is to come by funds which were a part of the provident fund corpus.
So, the total burden on the state-run banks would range between Rs 4,200 crore and Rs 5,700 crore, depending on the outcome of the negotiations.
First pension option for bank staff since 1993
Over the last few quarters, banks have been providing for a higher pension and salary liability in the wake of the wage settlement negotiations that are underway. This will be the first time since 1993 that bank employees will get the option for pension scheme.
For new employees who join the public sector banks, there will be an option to join the New Pension Scheme (NPS) where they will make a contribution, to be matched by their employer.
Central Government employees, who joined on or after January 1, 2004, have to set aside 10 per cent of their basic salary as their contribution to the NPS and a matching contribution is made by the government.
The corpus is then transferred to three public sector fund managers – State Bank of India, UTI and Life Insurance Corporation – which are allowed to invest up to 15 per cent in equities. In the first year, the corpus earned a weighted average return of 14.8 per cent.
Numbers expected to rise over 5 yrs
Over the next five years, with over 70 per cent managerial staff scheduled to retire, banks have stepped up hiring and the numbers are only going to rise. For instance, the public sector banks hired nearly 33,000 employees during the first nine months of the last financial year, as against around 22,000 in 2007-08 and around 6,000 in 2005-06. The unions have, however, rejected the proposal for a cost-to-company or variable pay structure proposed by banks.
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