Pension Reforms Bill

Violation of the right of working people

The Pension Fund Regulatory and Development Authority (PFRDA) Bill 2011 is one of the Bills planned to be tabled in the monsoon session of Parliament in August 2013. The proposed reform to the pension regime in the country has been debated hotly. Many sections of the working people have opposed the move which is not addressing any of their concerns.

Pension must be affirmed as a universal right. It is workers who create all value through their labouring power; therefore, we have the right not only to wages that fulfill our needs during our working life but also the right to a pension after retirement.

What the working people are demanding is that every worker, whether in the government or private sector or in any occupation, has the right to receive a reasonable monthly amount, on retirement which must be guaranteed by the government. This right belongs to all workers, irrespective of wage level or occupation or who their employer is. Pension must be protected against inflation so that the pensioner is entitled to an assured real value. Old age security is a right that must be guaranteed by society.

The pension reform does not address either the concern of universal coverage adminor that of an assured return. In the first place, before the pension reforms, there was no universal pension scheme that guaranteed every worker a pension that is protected from inflation, throughout his retirement. With the introduction of the New Pension Scheme (NPS), the bourgeoisie is claiming to address this issue by “extending” the NPS to all workers not covered by EPS or any other scheme. Further, it is claiming that the privatization of pension funds will bring the benefit of higher returns to the pensioners. However, both these claims are fraudulent. As long as the state does not create a universal pension fund for all workers in all sectors and leaves it to the arbitrary whims of each private employer, all workers cannot be assured of a defined value of pension. The NPS ensures that the contribution of the worker to his pension is defined, but does not ensure a defined benefit.

Prior to the New Pension Scheme, all government employees were covered by their respective schemes. Employees of registered business enterprises (“organised” sector as per government’s definition) were covered by the Employees Provident Organisation of India’s Employees Pension Scheme (EPS), which applied only to those earning up to Rs.6500 per month; there was no pension scheme for employees of unregistered enterprises (“unorganised” sector as per government’s definition) and employees of registered enterprises earning over Rs.6500 per month.

The NPS was introduced in 2004 as a defined contribution scheme, which would cover all central government employees joining after that date; it was further extended to cover all employees including those working in unregistered enterprises, who come in the category of voluntary subscribers. In the case of the former, the government would match the contribution of its employees; in the case of the voluntary subscribers, it was left to the choice of the employer to match the employee’s contribution - it was not made statutory. In other words, whatever a pensioner will get in the future under this scheme will come only out of one’s own contribution unless the employer chooses to match that. The NPS has not made any difference to those covered by the EPS.

The NPS is being promoted as a measure of “financial inclusion”, meaning that it is meant to include crores of people who currently have no pension scheme. But by not making it statutory/legally mandatory for the employer to contribute to the scheme in equal measure as the employee, the NPS does nothing to ensure pension to these crores of people currently not covered by any pension scheme. Those who are daily wage earners or self-employed, or on contract are required to make a minimum contribution of Rs.1000/ annum, but with no matching contribution guaranteed, the annuity on this contribution would be very minimum. Thus, while it was made out by the government propaganda that there would be a huge rush of workers to opt for the NPS, in fact there have been hardly any new subscribers.

In terms of return to the pensioner, the NPS compares unfavourably with the EPF-EPS. The EPF offers a fixed rate of return and the EPS (Employees’ Pension Scheme) offers survival benefit. With NPS, if a subscriber dies before retirement, the family gets only the accumulated corpus; with EPS, the wife is entitled to 50% of the pension amount with minor children (a maximum of two) entitled to another 25%.

At the recent Indian Labour Conference, workers argued that given double digit inflation in consumer prices, it is essential that pension should be adjusted once a year or more frequently based on movements in an appropriate price index. The representatives of the capitalists and of the central government rejected this just demand during the deliberations at the Conference. Instead, the Prime Minister announced that the minimum pension would be Rs 1000 per month, a miserly amount which, over time, will shrink even further in terms of its purchasing power.

In these circumstances, with massive opposition to the reforms, the PFRDA Bill has been pending for several years. The provisional PFRDA was set up in 2003. A Bill to give it a statutory status was introduced in 2005 but could not be passed due to the widespread opposition of people; it lapsed with the expiry of the term of the previous Lok Sabha. In March 2011, a new Bill was introduced in the Parliament; the Parliamentary Standing Committee cleared the Bill while proposing some amendments. The Standing Committee gave its report in August 2011, and the Cabinet approved the Bill with the amendments in October 2012.

The PFRDA Bill, when passed, will legitimise what has already been implemented in April 2008 - the privatisation of pension contributions of Central Government employees and other sections of the working class, to the New Pension Scheme (NPS). It will institutionalise the move to hand over the management of Pension Funds to Indian and foreign finance capitalists, handing over crores of future benefits of workers for speculation.

What is behind these reforms in the Pension scheme and its management?

The bourgeoisie is looking at pension reform with the perspective of making the large volume of funds available to the financial capitalists for trading and speculating in the stock market. At the same time, it wants to restrict the liability of the state towards assuring pension for the working people. On the contrary, the working people’s demand is for extending the coverage of a formal pension scheme to the vast majority and not just restrict it to government employees. The NPS or any other new scheme should meet this demand rather than looking to make pension a source of profit and as a means to reduce the government’s financial commitment.

The raising of cap in FDI in insurance to 49% and making this applicable to the pension sector are part of the overall move to privatize these sectors. Private capital, both Indian and foreign, are being welcomed using all kinds of justifications of efficiency and in the name of making the NPS more “inclusive”. The privatization of pension funds and bringing FDI into it is being pushed on the pretext that pensioners should get much more than just their own contributions. By choosing to allow investments of their future benefits in various financial instruments in the financial markets, they can make higher returns. But what is hidden is that investing in financial markets is subject to massive risks and may end up with the working people losing everything that they have carefully saved.

The working class knows from its own experience that the promises made by the bourgeoisie that its reforms will bring benefit to the working class and people are a big fraud. We can have no illusions about this, and the only way is for the class to fight relentlessly for universal rights to assured retirement benefits including pension that is protected for inflation.


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Defeat Privatisation    New Pension Scheme (NPS)    Pension Fund Regulatory and Development Authority (PFRDA) Bill 2011    Aug 1-15 2013    Political-Economy    Rights    

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