Letter to BS: Indian pension system needs a comprehensive review, overhaul

This refers to Somesh Jha’s report “Hike in minimum pension will need budgetary support: EPFO” (February 26). The Indian pension system needs a comprehensive review and overhaul. Since December 2003 when the government unilaterally and prospectively discontinued a defined payment-based pension scheme, which existed for the central government employees, and introduced a New Pension Scheme (later rechristened as National Pension System), temporarily exempting defence personnel from the changeover, the policy approach to pensions has been one of “hit and run”. By now, there appears to be a consensus that a pension scheme, as a social security instrument, is an essential ingredient of remuneration packages across public and private sector establishments. If that be so, there should be an agreement on the following:

(a) The pension component should be part of the wages paid by the employer. If the central or state government has to subsidise the cost of pension outgo, for any specific reason, it should be on a monthly or annual basis.

(b) Pension should have a relationship to the earnings/wages. The Centre may consider including review of the pension system for its employees in the term of reference for Central Pay Commission. It should also appoint a high-level pension review committee to consider integrating pension schemes, now operated by different agencies, in public and private sector organisations.

M G Warrier

Mumbai