In a written reply to the Lok Sabha, the central government ruled out the possibility of reintroducing the Old Pension Scheme that existed before the National Pension System (NPS) was introduced in 2004.
The Minister of State for Finance & Corporate Affairs, Anurag Thakur said, "There is no proposal to replace the NPS with old pension scheme in respect of Central Government employees recruited on or after 01.01.2004."
Trade unions and pressure groups had demanded the reintroduction of the old pension scheme as it came with a defined benefit for the retired government employees. Defined benefit pension is where the pension is predetermined. It is fixed based on the number of years of service and the salary earned. NPS, on the other hand, is market linked.
The government cited two reasons for not reintroducing the old pension scheme:
- rising and unsustainable pension bill, which caused the government to make a conscious move from defined benefit, pay-as-you-go pension scheme to defined contribution pension.
- "the transition also helped in freeing the limited resources of the Government for more productive and socio-economic sectoral development," it said.
NPS was introduced in 2004 and made mandatory for all central government employees. It was later extended to state government employee and private sector. It does not provide guaranteed pension as it allows the subscribers to invest in government bonds, corporate bonds and equities through the pension scheme, making the pension payable dependent to the performance of these market-linked assets.