Maharashtra Deputy Chief Minister Devendra Fadnavis echoed in the Legislative Council former Planning Commission deputy chairman Montek Singh Ahluwalia’s opposition to the Old Pension Scheme (OPS).
Fadnavis was responding to a question raised by Congress member Rajesh Rathod regarding the state’s plans on the implementation of OPS for teachers and state government employees who joined after 2005.
Recently, economist and ex-deputy chairman of the Planning Commission (now NITI Aayog) Ahluwalia said that going back to implementing OPS was a recipe for financial bankruptcy.
Fadnavis told the Upper House, Ahluwalia has said that reverting to OPS amounts to passing the financial burden onto the next governments. Salaries, wages and pensions already account for 58 per cent of the state’s annual expenditure and it is increasing to 62 per cent. By the next financial year, it will be 68 per cent.
Under Old Pension Scheme (OPS), employees get a defined pension. An employee is entitled to a 50 per cent amount of the last drawn salary as the pension. OPS was discontinued by the BJP-led NDA government in 2003 with effect from April 1, 2004.
Major retirements will happen in 2030. More than 2.5 lakh employees will retire by then. Some of the pension amount deducted currently from the monthly salaries is invested in the capital market. Most of the major countries follow the same process, he said.
I will hold a meeting with teachers and the finance secretary to find out if there is any viable solution which would be better than the National Pension Scheme (which is contributory), Fadnavis said.
Under the new pension scheme, employees contribute 10 per cent of their basic salary towards pension while the government contributes 14 per cent.
If you keep the pension amount in a bank, you will get a maximum of 4 per cent interest on it. India being a developing country, our inflation will remain over 7 per cent. It means, keeping the amount in a bank is not viable.
The deputy CM said, High returns are possible only in the capital market. There are some rules and regulations for investing a portion of deducted amount (from salary) into the capital market, he said, adding, In last five years, mutual funds have given 11 per cent returns on investments. Hence, people should not be worried about it.