Raghuram Rajan on revival of the old pension system

There may be less expensive ways to deal with anxiety, Raghuram Rajan said. (File)

New Delhi:

Former RBI Governor Raghuram Rajan expressed concern over the decision of some states to restart the old pension scheme and suggested finding cheaper ways to meet the demands of government pensioners.

Raghuram Rajan further said that the old pension scheme involves huge costs in the future due to indexation of pensions to the current salary.

“It’s a huge challenge, not necessarily in the short term, but in the long term,” he said, adding that state governments need to think about the long-term implications for public finances and public servants. they need help among the counties they deal with.

Raghuram Rajan, now the Catherine Dusak Miller Distinguished Professor of Finance at the University of Chicago’s Booth School of Business, said that it was his understanding that going back to the old pension system would not be technically or legally possible.

“If so, there may be less expensive ways to address the concerns that prompt such moves,” Raghuram Rajan told PTI in an email interview.

In a major move, a select group of central government employees were given a one-time option to opt for the old pension scheme.

Employees who joined the central civil services on advertised or notified posts prior to December 22, 2003, the date of notification to the National Pension Scheme (NPS), are eligible to join the old pension scheme under the Central Civil Service (Pension) Rules, 1972 (now 2021).

Under the Old Pension Scheme (OPS), employees receive a fixed pension. An employee has the right to receive 50 percent of his last salary as a pension.

OPS was discontinued in 2003 by the NDA government with effect from 1 April 2004.

Under the New Pension Scheme (NPS), employees contribute 10 percent of their basic salary to pension, while the government contributes 14 percent.

The governments of Rajasthan, Chhattisgarh and Jharkhand have informed the central government/Pension Fund Regulatory and Development Authority (PFRDA) of their decision to resume OPS for their employees.

Government of Punjab has issued a notification on 18 November 2022 to introduce OPS for state government employees covered under NPS. Jharkhand also decided to go back to OPS.

(Except for the headline, this story was not edited by NDTV staff and was published on a syndicated channel.)

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