Trade Unions Still Demand Rollback Of Employee Contribution To Unified Pension Scheme

While the Unified Pension Scheme guarantees a minimum pension to government employees, most labour unions are still asking for a rollback of the employee contribution.

Though the unified pension scheme meets the demand for an assured pension at 50% of the last drawn average basic pay, it continues with the system where employees continue to contribute towards their pensions. While the move is beneficial in limiting government outlays, that's the part that most labour unions are unhappy about.

CH Venkatachalam, general secretary at the All India Bank Employees Association, said that the Unified Pension Scheme is a little better compared to the National Pension Scheme since it guarantees a pension of 50% of the average basic pay drawn over the last 12 months prior to superannuation for a minimum qualifying service of 25 years.

Employees are also relieved over the lump sum that they will now receive on retirement and over the dearness relief being offered. However, after 25 years of service, the employer is expected to take care of an employee's retired life, he said. A pension is paid for that service. If the scheme is contributory, employees can also invest that money themselves for retirement.

"Employees continue to see inflation-related, not market-orientated returns," said Venkatachalam.

Srikumar, general secretary at the All India Defence Employees Federation, also said that the UPS also requires employees to contribute 10% of their basic pay and dearness allowance till retirement. As such, not much has changed for employees.

Also, the labour unions did not reach an agreement with the government, he said. The Cabinet took the decision and informed labour unions, he added.

According to the note by the Bank Employees Federation of India too, employees are seeking the restoration of a non-funded defined benefit pension scheme. The UPS is not comparable to the benefits of the Old Pension Scheme. The defined benefit scheme is an unfunded, non-contributory scheme, whereas the UPS is still a funded, contributory scheme.

However, some unions, such as the Bharatiya Mazdoor Sangh, said that most of their demands, including the demand for an assured 50% of the basic pay for pension, the provision of dearness relief with pension, and a minimum pension, have been met. As such, while it welcomed the UPS, it said that further clarity is required on other features.

The UPS provides an assured pension of 50% of the average basic pay drawn over the last 12 months prior to superannuation for a minimum qualifying service of 25 years. This pay is proportionate to a shorter service period, up to a minimum of 10 years.

The scheme also provides an assured family pension, along with an assured minimum pension of Rs 10,000 per month on superannuation after a minimum 10 years of service. Along with inflation indexation, it provides a lump sum payment at superannuation in addition to gratuity.

The fiscal impact of the UPS is unclear but is unlikely to see a material increase in government outgo, according to Radhika Pandey, associate professor at the National Institute of Public Finance and Policy.

The government's output will depend on the number of employees who opt for the UPS and actual market returns, among other factors, she said.

Despite the government's contribution rising to 18%, the outgo on the lump sum to be paid to the employee and the gratuity are likely to decline because of the employee's contribution, she explained.