Current Affairs 2022: Shifting to Old Pension System

By 2004, all states of India, except West Bengal and Tamil Nadu, voluntarily moved to the National Pension Scheme.

The states shifting back from the National Pension Scheme (NPS) back to the old framework called PAYG, would be comparable to committing financial hara-kiri, a self-destructive demonstration as indicated by SBI Research. As of late, Rajasthan and Chhattisgarh have declared that they are returning to the old pension scheme satisfying their political decision guarantees.

What Is The Old Pension Scheme (PAYG)?

The old pension scheme guarantees a deep-rooted pay post-retirement, and the insured sum is comparable to half of the last drawn compensation. Atal Bihari Vajpayee ceased the old pension scheme in 2003 and presented the National Pension Scheme. Under PAYG, resources from the current generation of employees were used to pay the pensioners.

Consequently, a PAYG scheme includes the immediate exchange of assets from the continuous period of citizens to subsidise the pensioners. Nonetheless, it was stopped given the issue of pension obligation supportability, a maturing populace, the unequivocal weight on people in the future, and the motivating force for exiting the workforce.

Old Pension Scheme A Fiscal Burden

The PAYG scheme was popular in many nations before the 1990s but was ceased, given the fiscal burden. The State Bank of India's financial aspects division has advised that moving to the old pension scheme will probably have a shocking effect by setting a rush to the base with different states taking action accordingly.

The ageing record will probably reach 76 by 2036 from the ongoing worth of 40, while the advanced age reliance proportion will be 22-23% by 2036 from the constant degree of 15%. This implies it will be troubling the aged populace and is uncalled for to the younger generation.

Opportunism And Old Pension Scheme

Pension alterations began in the country in 1999. By 2004, all states, except West Bengal and Tamil Nadu, voluntarily moved to the National Pension Scheme. When the Fifth Pay Commission took effect, there were concerns about the supportability of the pension responsibility at the state level with the old pension scheme. As indicated by the SBI report, patterns in the pension responsibility of the state legislature in the long term show an exceptionally sharp increment.

Under the PAYG scheme, commitments of the ongoing age of employees were utilised to pay the pensions of existing pensioners. Under the old scheme, the direct exchange of assets from current citizens was used to support the pensioners. The old pension arrangement has a specific inbuilt account of expansion in allowance given inflation, age and pay commission. While in annuities, it was not there. Anyway, family pension in the national framework is fixed and proceeds with the same even after the demise of the pensioner.

What is National Pension Scheme Today?

The public administration had moved to an arrangement of characterized contributory pension benefit schemes, the public pension scheme (NPS), in 2004. A pension is a valuable asset that gets amassed through an individual's vocation and as payment after retirement. 9-10% of total compensation and dearness recompense is deducted as a willful commitment. The Atal Bihari government presented the arrangement on April 1, 2004.

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About the author

With a master's degree in environmental science, Priya Sengupta found her true calling in words and stories. A passionate writer, avid reader and a dog parent, she spends her me-time reading Bengali literature and listening to soulful music.

 

 

 

 

 

 

 

 

Note: The views expressed in this article are solely the author’s own and do not reflect/represent those of Shiksha.