Old Pension Scheme Good news for government employees, old pension scheme will be implemented in this state!

Old Pension Scheme in Himachal Pradesh: The election results of Gujarat and Himachal Pradesh have been declared. The ruling BJP has registered a historic victory in Gujarat. On the other hand, in Himachal, the Congress gained caste. Now along with this the discussion has also started regarding the old pension scheme. The old pension scheme was discontinued by the Center in 2003 amid concerns over long-term sustainability.

During the Himachal Pradesh election campaign for this year’s state elections, both the Congress and the AAP promised to go back to the old pension scheme. While the scheme was scrapped by the BJP in 2004, renewal of the OPS was a key issue in the Congress’ election manifesto. In Congress-ruled Rajasthan and Chhattisgarh, the switch back to the old scheme has already been done and Punjab will also join the list of these states.

 What are OPS and NPS

Under the old pension scheme, after retirement, an employee would be entitled to receive 50 per cent of his last drawn pay and dearness relief or his average earnings in the last 10 months of service, whichever is higher. In addition, OPS also had a provision for General Provident Fund (GPF), exclusively for government employees.

Unlike OPS, which pays a fixed pension to be paid by the government, NPS is a contributory pension scheme where employees contribute 10 per cent of salary and dearness allowance and the government pitches in with 14 per cent. The total amount of these money is deposited with the pension regulator Pension Fund Regulatory and Development Authority (PFRDA).

These funds can then be invested in equity or debt markets, as per the extant guidelines and the preference of the employees. NPS provides a pension fund for retirement which is 60 per cent tax-free on redemption while the rest needs to be invested in an annuity which is fully taxable.

Will it be dangerous to implement the plan?

However, if the new government in Himachal Pradesh reinstates the old Pension Bill, the long-term effects could be disastrous for the state. Since the scheme was scrapped in 2004, the number of employees eligible for the pension in Himachal has increased 2.5 times annually.

The number of employees eligible for pension in 2019-20 was 62,844. Government employees are mainly given pension from the tax revenue of the state government. The current 2021-22 tax revenue for the state is Rs 9,282 crore. Of this total amount, the current pension bill amounts to a staggering Rs 7,000 crore.

Since NPS was introduced in Himachal, the amount allocated for the pension bill has increased 12 times from the current value of Rs 600 crore in 2004. If this trend continues at this pace, the picture will not look positive for the state exchequer.