5 states inform Centre about reverting to old pension scheme

New Delhi: The finance ministry on Monday said governments of five states -- Rajasthan, Chhattisgarh, Jharkhand, Punjab, and Himachal Pradesh -- have informed the Centre about their decision to revert to the old pension scheme.

In a written reply to a question in the Lok Sabha, minister of state for finance Bhagwat Karad said as per RBI's report titled 'State Finances: A Study of Budget of 2022-23', the annual saving in fiscal resources that reversion to the old pension scheme entails is short-lived.

By postponing the current expenses to the future, states risk the accumulation of unfunded pension liabilities in the coming years.

"The state governments of Rajasthan, Chhattisgarh, Jharkhand, Punjab, and Himachal Pradesh have informed the central government/Pension Fund Regulatory and Development Authority (PFRDA) about their decision to restart Old Pension Scheme (OPS) for their state government employees," Karad said.

He further said there is no provision under the Pension Fund Regulatory and Development Authority Act vide which the accumulated corpus of the subscribers, viz governments' and employees' contribution towards NPS along with accruals, can be refunded and deposited back to the state government.

As per Reserve Bank of India's report titled 'State Finances: A Study of Budget of 2022-23', the annual saving in fiscal resources that reversion to the old pension scheme entails is short-lived. By postponing the current expenses to the future, states risk the accumulation of unfunded pension liabilities in the coming years.

The Reserve Bank of India (RBI), last month, had cautioned states against reverting to the Dearness Allowance-linked old pension scheme (OPS), which was in place till 2004, stating that it will add to the fiscal burden of states in the coming years.

Under the OPS, retired government employees received 50 per cent of their last drawn salary as monthly pensions. The amount keeps increasing with hike in the DA rates.

OPS is not fiscally sustainable as it is not contributory in nature and the burden on exchequer keeps on mounting.