Truth about pension in organized sector: SC Maheshwari

It is the general understanding in public that Pensioners’ in the organized sector (i.e C.G., State Govt, Local bodies, PSUs & industries) are well off .(This may be true only for those retired as IAS & equivalent). Very few in general public may be aware that over 28lac pensioners in organized sector get less than Rs 1000/ PM as pension.

Pension weather contributory or non contributory is a Social security tool. Thus the amount of Pension has be linked with sustainability& the right to live with dignity .

Pension as per Article 366 (17) of the Constitution of India; means a pension, whether contributory or not, of any kind whatsoever payable to or in respect of any person, and includes retired pay so payable, a gratuity so payable and any sum or sums so payable by way of the return, with or without interest thereon or any other addition thereto, of subscriptions to a provident fund. 

According to Pension described in section 60 of the CPC and section 11 of the Pension Act. There are three important features of ‘pension’. Firstly, pension is a compensation for past service. Secondly, it owes its original to a past employer-employee or master-servant relationship. Thirdly, it is paid on the basis of earlier relationship of an agreement of service as opposed to an agreement for service. This relationship terminates only on the death of the concerned employee.

Pension is an area where clarity of vision is often obscured by ill- considered notions. However, the Supreme Court of India has, in the landmark judgement of D.S. Nakara and others vs. Union of lndia (AIR 1983, SC 130) clarified all the issues connected to pension 

While examining the goals that a pension scheme should seek to sub-serve, the Apex Court held that,”A pension scheme consistent with available resources must provide that the Pensioner would be able to live :

(I) free from want, with decency, independence and self respect and

(II) at a standard equivalent at pre retirement level

The Court observed “We owe it to the pensioners that they Live, not merely exist”The Court held that pension is neither a bounty nor a matter of grace depending upon the sweet willof the employer It is not an ex gratia Payment, but a payment for past services rendered. It is a social welfare measure, rendering socio-economic justice to those who in the heyday of their life ceaselessly toiled for the employer on an assurance that in their old age they would not be left in the lurch

The Vth CPC in their report commented “It needs to be averred emphatically that pension is not in the nature of alms being doled out to beggars. The senior citizens need to be treated with dignity and courtesy befitting their age. Pension is their statutory, inalienable, legally enforceable right and it has been earned by the sweat of their brow. As such it should be fixed, revised, modified and changed in ways not entirely dissimilar to the salaries granted to serving employees”

According to Govt. in organized sector two types of Pension schemes are prevalent i.e. 1.Non contributory (defined benefit) 2.Contributory.(defined Contribution)

An employee in the organized sector covered by so called non- contributory Pension scheme in fact during his hey days contributes to his old age security in three ways i.e

1.By tirelessly toiling, for the development of the country during the entireperiod of his/her productive years.

2.By accepting Lower salaries. As salaries of pensionable employees are by design kept on lower level:.In the context of Civil Servants Pension payments, the principal guiding the fixation of pay package is one intentionally spreading out the compensation over long period of time, whereby the wages paid out during the work tenure is kept low by design and pension payments during the retirement phase compensate for the low wages. (This has come out in studies got conducted by Central Pay commissions.)

3. By foregoing every month with interest the matching contribution by employer to his/her PF( which is to the tune of 8.33To 10% of his/her monthly emoluments)

Therefore, it is a big lie to say that pension system in vogue in organized sector In India, is the defined benefit i.e the system is essentially non-contributory in nature and any particular year’s pension liabilities are met from the government’s annual revenue expenditure account for that year.

In-fact, Government is trying to shy away from paying our pension & medical bills, because it is wasting tax payers money &Pensioners’ contributions on subsidies, populist schemes & Scams.

The Scheme of payment of pension was introduced: as it was greatly advantageous to the government.

(i)Government saved thousands of million by stopping matching contribution to provident fund.

(ii)One third the commuted part of pension was permanently retained by the government, till 1986 . Even after 1986 in restoring the commuted portion after 15years, Govt. retains the substantial balance with itself ( As per calculations the amount commuted would be got back by the government in ten years)

(iii)Due to delayed payment of arrears Govt. retains millions of rupees on a/c of death of pensioners/family pensioners during the intervening period. Thus enormous amount of money has been with the government for very long period. Had the government created a corpus out of these savings & invested properly, today pension would not have been a burden 

Every time when pay commission is constituted or pay commission recommendations are implemented Media creates a big hype of financial burden. 

Let’s see what actually the pay commissions have been giving to aam pensioner :existing Basic Pension+ DR + Squeezed portion of DR as fitment benefit. Yes the squeezed portion of DR as DA/DR paid is never sufficient to take care of inflation.

In fact there is no disruption of finances on account of increase in salaries/pensions of lower & middle level government employees / Pensioners due to pay commission recommendations.

Pay Commissions are constituted once in 10 years and the government is made to effect in¬crease in salaries of its employees at the end of 10 years as the dearness allowance (DA/DR) does not adequately take care of inflation. So at the end of 10 years, the government is benefitted from a squeeze in real pay/pension because the DA was nev¬er enough…So you have a increase,” (by way of fitment benefit)(Montek Singh27.02.2008)

Ours is a socialist country where in difference between haves & have nots should go on reducing progressively But Pay commission after pay commission has been shredding this basic fiber of socialistic state. In-fact every pay commission has been bestowing more & more benefits to serving & ex Bureaucrat compared to lower & middle grade employees &Pensioners The Sixth Central pay Commission created major discrepancy byraising the pay & pension of higher grade Bureaucrats i.e. IAS & equivalent by 3.37 times & in their case in the name of modified parity Pre & post 1.1.2006 pensioners have been brought at par while denying same benefit to all other pensioners. As a result (of this among retirees from lower & middle grades)though/even after retired/retiring from same post, same rank, same pay, with same length of service & same seniority , there is now a difference in pension of pre & post 2006 retirees ranging from few hundred to few thousand per month. Leaving the poor lot crying for parity.

Remedy:

Govt.should honor in letter & spirit the Supreme Court landmark judgement of D.S. Nakara and others vs. Union of lndia (AIR 1983, SC 130) and should not adopt differential formulae on the basis of date of retirement in revising Pensions

Source: http://www.karmayog.in/nl/truth-about-pension-organized-sector