Old Pension Scheme Update News: Implementation of the Old Pension Scheme by various states of the country is a regressive or backward step. Big information regarding old pension is coming out from RBI. Let us know about it in detail.
Many types of discussions are going on across the country regarding the Old Pension Scheme (OPS News). Now important news is coming out from the Reserve Bank of India regarding the Old Pension Scheme.
The implementation of the Old Pension Scheme by various states of the country is a regressive or backward step. Due to this, the financial position of the states may become ‘unstable’ in the medium to long term. Officials of the Reserve Bank of India have said this in an article.
Financial burden will increase
The article by Rachit Solanki, Somnath Sharma, RK Sinha, SR Behera and Atri Mukherjee states that in the case of the Old Pension Scheme (OPS), the total financial burden can be up to 4.5 times that of the New Pension Scheme (NPS).
New pension scheme was implemented
The new pension scheme was implemented as part of pension reforms more than a decade ago. The views expressed in the research paper are not those of RBI.
OPS has been implemented in many states
The article says that recently Rajasthan, Chhattisgarh, Jharkhand, Punjab and Himachal Pradesh have announced to shift from NPS to OPS.
The article states that OPS has defined benefits (DB) while NPS has defined contributions (DC), adding that while OPS has short-term attractions, it also has medium to long-term challenges. Short-term cuts in states’ pension expenditures may prompt decisions to reinstate OPS. This cut will be offset by a huge increase in future unfunded pension liabilities in the long run.
Big step back to OPS
The article warns that states’ return to OPS would be a major step forward and could increase their fiscal pressures to ‘unsustainable levels’ in the medium to long term.
States going to OPS are getting this benefit
It said the immediate benefit for states going back to OPS is that they will not have to spend on NPS contributions of current employees, but the unfunded OPS in future is likely to put ‘severe pressure’ on their finances.
It is not right to return to OPS
States will save just 0.1 per cent of gross domestic product (GDP) annually in pension expenditure by 2040 by reverting to OPS, but after that they will have to spend more on pensions equal to 0.5 per cent of annual GDP.
What situations are you facing?
It added that many developed economies with DB schemes in the past have faced rising public expenditure due to the rising life expectancy of their citizens, and the changing demographic landscape and rising fiscal costs have led many economies around the world to reevaluate their pension schemes.
Is forced to review from. The article said any return to OPS by states would be fiscally unsustainable. However, this may lead to an immediate decline in their pension expenditure.