A RBI study has revealed that implementing the old pension scheme (OPS) would be 4.5 times more costlier than the existing national pension scheme (NPS), thus increasing the financial burden on the government.
The study also highlighted that going back to old pension scheme can increase the fiscal stress to unsustainable levels in the medium to long term. The report comes after five states in India - Rajasthan, Chhattisgarh, Jharkhand, Punjab, and Himachal Pradesh had announced adopting Old Pension Scheme for government employees.
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The study has revealed that Chhattisgarh would be required to spend 4.6 times more to implement the OPS, while Jharakhand would have to spend 4.4 times more and Rajasthan 4.2 times more.
"Short-run reduction in states' pension outgo, which may be driving decisions to restore OPS would be eclipsed by the huge rise in unfunded liabilities in the long run", said the RBI study
Under the old pension scheme the government pays the entire amount and nothing is cut from the employees' salary. After retirement the governmeny employees receive the entire pension amount along with the benefit of revision in Dearness Allowance (DA) twice a year. Since the pension is based on the last drawn salary plus DA, the amount payable increases twice a year along with the DA. OPS also covers only the government employees.
The NPS that was introduced by the NDA government in 2004 for government employees extended to everyone including the self-employed and unorganised workers. Under this scheme the citizens contribute an amount until they are 60 and receive a pension after retirement. While the government employees will have to 10% of their basic salary along with the Dearness allowance, others could contribute as little as Rs 500 per month.