Pension is not merely a payment made after retirement. It is a promise that the State makes to a person who has spent the most productive years of his or her life in public service.
The renewed agitation for restoration of the Old Pension Scheme (OPS) in Assam should not be dismissed as a narrow employee demand. It raises a larger question about balancing fiscal prudence with social security.
The issue has acquired fresh urgency in Assam, where teachers’ and employees’ organisations have decided to intensify their movement for restoration of OPS. Their grievance, however, is not new. Assam’s employees have been campaigning for years against the National Pension System (NPS), which replaced OPS for new recruits in the State in 2005.
The latest mobilisation reflects growing anxiety about retirement security. Similar discontent has appeared in several States, making pension reform an important political and economic question.
The appeal of OPS is easy to understand. Under the old defined-benefit arrangement, an eligible retired employee receives a pension linked to salary and qualifying service, with inflation protection through dearness relief. The employee therefore knows that retirement income will not depend primarily on the performance of financial markets.
NPS changed that architecture by moving towards a defined-contribution, market-linked system. It was designed to make pension liabilities more predictable for governments and encourage long-term retirement savings.
That logic cannot simply be dismissed. OPS can impose a substantial and rising burden on future budgets because today’s governments make promises that subsequent governments must honour.
As the number of pensioners grows and life expectancy increases, unfunded pension commitments can crowd out spending on schools, hospitals, infrastructure and development.
The Centre has maintained that returning universally to OPS would create an unsustainable fiscal liability. This concern must be acknowledged.
But fiscal sustainability cannot become an excuse for transferring all retirement risk to employees. A government servant cannot diversify employment risk in the same manner as an investor. Nor should a pension system leave retirees excessively exposed to inflation, market volatility or uncertain longevity. A public pension is social insurance, meant to prevent decades of public service from ending in financial insecurity.
This is where India’s current policy landscape becomes complicated. The Unified Pension Scheme (UPS), introduced for central government employees, attempts to combine elements of assured retirement income with the contributory framework. It offers a guaranteed pension subject to prescribed conditions while retaining employee contributions.
Several States have, however, continued to demand or pursue OPS restoration, while employee organisations argue that UPS does not adequately reproduce the security they associate with OPS.
Assam’s experience demonstrates why a binary OPS-versus-NPS debate is inadequate. The State needs a pension architecture that is fiscally credible and socially secure. Instead of treating employees’ demand as either an electoral bargaining chip or an unaffordable promise, the government should publish a transparent long-term assessment.
What would restoring OPS cost over 10, 20 and 30 years? How would the liability change under different assumptions about recruitment, salaries, inflation, longevity and retirement age? What proportion of the State’s revenue would pensions consume? Employees and citizens deserve answers grounded in numbers.
There is also an intergenerational question. A pension promise made today may be financed by taxpayers decades from now, many of whom may have no connection with the employees receiving it.
Conversely, forcing today’s employees into inadequate retirement protection can create another intergenerational injustice. The objective should be to distribute pension costs and risks fairly across generations.
India should consider a middle path. States could establish independently assessed pension funds, strengthen actuarial reporting and create explicit fiscal ceilings for pension commitments. Governments could contribute more to defined-contribution accounts for lower-paid employees, provide stronger inflation protection and guarantee a minimum retirement income.
Employees should receive clear projections of what their corpus is likely to provide. Pension policy must become comprehensible to the people whose lives depend upon it, not merely financial experts.
There is another lesson from the Assam agitation. Pension reform cannot be imposed through administrative notifications alone. It requires consultation. Teachers, civil servants, financial experts, economists, actuaries and representatives of taxpayers should participate in a structured dialogue.
The government should disclose the assumptions behind every proposed reform and explain not only what employees will receive, but who will ultimately bear the cost.
Political parties, too, must exercise restraint. Restoring OPS can be an attractive electoral promise because its benefits are immediate while much of its fiscal cost is deferred. But pension policy cannot be reduced to election-cycle arithmetic.
Governments that promise generous benefits without creating a funding mechanism merely postpone the bill. Equally, governments that reject employees’ concerns without improving retirement security risk weakening trust in public service.
For Assam, the question is especially significant because government employment remains an important source of economic stability. A secure pension can help retain experienced teachers, engineers, administrators and other professionals in public institutions. Yet, fiscal stress can also weaken development if an expanding pension bill leaves insufficient resources for the next generation.
The right answer, therefore, is neither an unconditional restoration of OPS nor an uncritical defence of NPS. India needs a social-security compact in which the State accepts a meaningful responsibility for old-age income while employees and taxpayers are protected from open-ended liabilities.
Assam’s renewed agitation should be treated as an opportunity for such a conversation. The government should sit across the table with employee organisations, publish the actuarial numbers, examine the strengths and weaknesses of OPS, NPS and UPS, and design a system that is both humane and financially durable.
A pension is a promise about tomorrow. A responsible State must ensure that promise is neither broken nor made recklessly. India’s challenge is to make retirement secure without making the future fiscally insecure.
Siddharth Roy is a civil engineer, a consultant to Rashtriya Raksha University under the Ministry of Home Affairs, and a columnist.