Pension ‘reform’, through the Pension Fund Regulatory and Development Authority (PFRDA) Bill, isone of the major items on the immediate legislative agenda of the Indian big bourgeoisie.
The essential features of the PFRDA Bill are:
- Pension will be based on the amount of contributions made by the worker during his working life and the value of contribution at the time of retirement, which would be subject to fluctuations in the stock market. In other words, the value of workers’ savings would not be protected and there will be no pre-defined amount or ratio of salary that is guaranteed on retirement.
- The government will give up its role of protecting the value of workers’ savings; it will instead hand over charge to various institutions of finance capital, both state owned and private, Indian and foreign.
- A part of workers’ contributions will be invested in the stock market, and each contributing member will be given a choice about the composition in which his or her savings will be allocated, between government debt, shares of private companies and other financial instruments.
There has been widespread opposition to this Bill on the part of all the organisations of the working class.
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 in 2010. In March 2011, a new Bill was introduced in the Parliament; the parliamentary Standing Committee has also cleared the Bill. An important change in the new Bill is that it does not talk of allowing FDI in pension funds; foreign finance capital will apparently be allowed through another government act.
Through this Bill, the big capitalists want access to the big pool of savings of the Indian working class, which has so far been under the control of the state. The Bill is aimed at expanding the coverage of pension funds and converting them into sources of finance for monopoly capitalist ventures. It is aimed at providing a cheap source of finance for the capitalist class, at the expense of a guaranteed income stream for workers after old age.
State-owned and private institutions of finance capital presently handle Rs. 7000 crore of pension funds, covering about 11 lakh workers in large-scale establishments. The State Bank of India, IDFC, ICICI Prudential Life Insurance, Kotak Mahindra Bank, Reliance Capital and Life Insurance Corp of India are some of these institutions. Most of the 23 life insurance companies in India, nearly all of which have a foreign partner holding a 26 percent stake, are eager to enter the pension fund market.
One of the major associations of the big capitalists, ASSOCHAM, has estimated that India’s pension fund (PF) market could grow to Rs. 20 lakh crore over the next few years. Indian capitalists see enormous potential for expanding the coverage of pension schemes to include 30 crore workers and self-employed persons who are currently not covered as a part of the New Pension System (NPS).
The PFRDA Bill is a bill for privatisation of pension funds through the back door. It is a diabolical attempt to funnel enormous amounts of workers’ savings into the speculative world of stock markets. The state is acting as per the dictates of Indian and global finance capital.
The new pension scheme 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. However, by offering one single scheme to cover both wage-workers and self-employed persons, capitalist employers are in effect being relieved of their obligation to contribute to the retirement fund of those they employ, be it on regular or temporary contract. In other words, whatever a pensioner will get in the future under this scheme will come out of one’s own contribution only. There is no contribution by anyone else, not even by the central or state government. Why should workers join such a scheme at all, instead of keeping their savings in long-term fixed deposits, or gold or in any other form they choose?
The struggles of workers on the global scale led to a significant improvement in social security during the 1950's, with the acceptance of the principle that pension should be related to the pay at the time of retirement, rather than based on the average pay during the working life. When inflation became rampant, the working class struggled and succeeded in getting pension linked to inflation through a defined formula. The PFRDA Bill will take away all these gains achieved by the working class through long years of struggle. It will deprive workers of their hard-earned savings, subjecting them to manipulation by speculative finance capital.
The proposed Bill violates previous declarations of principle and Supreme Court decisions on pension being a right of a worker. The Fourth Pay Commission Report categorically declared that “… pension is not by way of charity or an ex-gratia payment, or purely social welfare measure, but may fairly be said to be in the nature of a ‘right’ which is enforceable by law.” In one of the judgments, the Supreme Court said that “pension was not a bounty payable on the sweet-will and pleasure of the government and … pension is a valuable right vesting in a government servant.”
Pension is a right that belongs to all workers, and not only to government servants. One of the major problems is that the laws in our country recognise it as a right only for a small section of workers. In the name of extending pension coverage to all working people, the central government is trying to convert this right of workers into its opposite – into a scheme for robbing workers for the benefit of the capitalist class.
The working class must outright reject this deceptive way of privatising pension funds. The savings of workers cannot be handed over to Indian or foreign capitalists to play with. Pension is a right that belongs to workers, and the State is duty bound to protect the real value of workers’ savings and ensure adequate monthly flow after retirement. Pension amount must be pre-defined and not subject to any “market risk”.