Dispatch News.
Beware, states! The return to the old pension scheme (OPS) is a dangerous financial risk. That’s the warning from the Reserve Bank of India (RBI). Despite this, some states, such as Himachal Pradesh, Rajasthan, Chhattisgarh, and Punjab, have decided to switch back to the OPS, jeopardising their financial security.
Under the OPS, the government gave the entire pension amount, but this increased the government’s liability and put the burden of employees’ pensions on the states. On the other hand, the new pension scheme (NPS) is a market-linked system with contributions from both employers and employees.
The RBI warns that returning to the OPS may seem like a short-term solution, but it will only lead to long-term problems. By postponing current expenses, states risk unfunded pension liabilities accumulation in the coming years. In just 30 years, the states’ cumulative pension bill jumped to an alarming Rs 3,86,001 crore in 2020–21 from Rs 3,131 crore in 1990–91. States’ pension payments take away a quarter of their tax revenues, and it’s much higher for some.
The NPS, on the other hand, is a contributory pension scheme where employees contribute 10% of their salary, and the government contributes 14% towards their NPS accounts. It allows individuals to invest in three types of funds and provides the opportunity to receive a continuous income after retirement.
Don’t be fooled by the short-term benefits of the OPS. The RBI is warning states of the dangerous financial risk that comes with returning to the old pension scheme. Protect your financial security and stick with the new pension plan.
