Justification of Universal Pension
Bruhaspati Samal
General Secretary
Confederation of Central Govt Employees and Workers
Odisha State CoC, Bhubaneswar
India’s journey with pensions began during the British colonial era, primarily for civil servants. After independence, the government implemented the Old Pension Scheme (OPS) to ensure income security for retired employees. This scheme provided a guaranteed, inflation-linked pension, calculated as 50% of the last drawn salary. It was entirely funded by the government, with no contributions from employees. However, fiscal challenges in the early 2000s, driven by a growing pension liability, led to significant policy changes. The National Pension System (NPS) was introduced on January 1, 2004, marking a shift from the defined-benefit model of OPS to a defined-contribution model. Under NPS, employees contribute 10% of their basic salary, matched by an equal contribution (subsequently raised to 14%) from the government. The funds are invested in market-linked instruments, and the eventual pension depends on investment returns. While this approach reduced the government’s financial burden, it introduced uncertainties for employees, as pensions are now subject to market risks.
In response to persistent demands from employees for more secure retirement benefits with restoration of OPS for last two decades, the government recently announced the Unified Pension Scheme (UPS) on 24th August, 2024 followed by the Notification dated 24th January 2025 issued by Ministry of Finance (Gazette Notification dated 25th January 2025) which has dissatisfied the employees and pensioners since the term ‘Pension’ (Assured Pension, Minimum Pension and Family Pension) will henceforth be known as ‘Payout’ (Assured Payout, Minimum Payout and Family Payout) which is in strict contradiction to the Press Release dated 24th August 2024 on UPS. The declaration of the Central Govt. promising to revolutionize the pension system by streamlining processes and ensuring equitable benefits through UPS is seen to be confusing, as if there would be no pension system in future. As apprehended, the term ‘Payout’ in substitution of ‘Pension’ is a strategy of the Central Govt. to abolish the pension system since the above Gazette Notification clarifies that UPS is not a pension scheme, but an option under NPS. The replacement of OPS with NPS / UPS reflects the impact of neo-liberal economic policies, prioritizing fiscal discipline over welfare. While NPS reduces the government’s financial liability, it shifts the burden to employees, exposing them to market volatility. Public sector employees under NPS often find themselves at a disadvantage compared to their OPS counterparts, who enjoy predictable, inflation-linked pensions. Furthermore, there are glaring contradictions in pension policies. Defense personnel benefit from “One Rank, One Pension,” ensuring parity in pensions for retirees of the same rank, irrespective of retirement date. However, Agniveers, recruited under the Agnipath scheme, are excluded from pension benefits. Similarly, elected representatives continue to enjoy OPS-like benefits, while government employees and others are denied the same. These disparities raise questions about equity and fairness and go against the spirit of the Article 14 of the Constitution of India.
Simultaneously, while West Bengal and Tamil Nadu did not adopt the NPS for their employees and already under OPS, states like Rajasthan, Chhattisgarh, and Punjab have reintroduced OPS for their employees complicating the pension landscape. Adding to these complexities are state-specific pension initiatives. For instance, Odisha’s Madhubabu Pension Yojana provides financial assistance to senior citizens, widows, and disabled individuals. Similarly, schemes like Uttar Pradesh’s Old Age Pension Scheme and Tamil Nadu’s Indira Gandhi National Old Age Pension Scheme cater to vulnerable populations. While these programs offer some relief, they highlight the fragmented and uneven nature of India’s pension system.
India’s fragmented approach leaves a significant portion of its workforce—especially in the unorganized sector—without any retirement benefits. As per the Periodic Labour Force Survey 2022-23 released in June 2023, 57.3% of the labour forces in India are self employed who are bereft of any social security and pension, 20.9% are regular salaried workers and 28.1% are casual workers. Of the regular salaried workers, 53.9% have no social security benefits. The casual and contractual workers increasingly replacing the permanent workers are deprived of social security scheme including pension. Above all, 94% of the workforces are engaged in the organized sector where social security is either completely absent or extremely week. These disparities are particularly concerning given India’s demographic trends. The India Aging Report 2023 underscores the urgency of addressing pension coverage. In 2022, individuals aged 60 and above constituted 10.5% of the population, amounting to 14.9 crore people. By 2036, this figure is projected to rise to 15% (22.7 crore), and by 2050, to 20% (34.7 crore). The decline of joint family structures and the rise of nuclear households further exacerbate the vulnerability of the elderly, making robust social security systems imperative. Pension systems have long been a critical aspect of social security, ensuring economic stability and dignity for retirees. In India, where socio-economic disparities are significant, and the aging population is rapidly increasing, the debate around universal pension coverage is both urgent and complex.
India’s constitutional provisions provide a strong foundation for advocating universal pension coverage. Article 41 of the Indian Constitution directs the state to make effective provisions for securing the right to work, education, and public assistance in cases of unemployment, old age, sickness, and disability. Additionally, entry 24 of the Concurrent List under Schedule VII emphasizes old age pensions. Judicial pronouncements have also reinforced this perspective. In the landmark D.S. Nakra v. Union of India case (1982), the Supreme Court held that pension is not a bounty but a right, recognizing it as a deferred payment for past services rendered. Thus, Pension is a constitutional right.
Today the elderly population who have contributed a lot during their working life have become extremely vulnerable due to absence of worthwhile social security network including pension. Nobody can ignore their active participation in nation building and increasing the GDP. The State therefore can’t deny its responsibility in providing them with social security at a time when they become incapable of earning their livelihood in the old age. However, meeting the financial burden of universal pension is undoubtedly a challenge, but it is not insurmountable. The Govt. which is capable of providing free ration to nearly 80 crore citizens, to write off bad loans of the corporate houses frequently, i.e. 14.56 lakh crors during last 10 years, funding for universal pension to all citizens may not be a problem at all. More importantly, many countries with far lesser resources than India like Namibia, Botswana, Mauritius, Kenya, South Africa, Nepal and Bagladesh have already implemented Universal pension schemes. Additionally, the government can explore avenues such as rationalizing tax exemptions, increasing contributions from high-income groups, and leveraging technology to reduce administrative costs. Only the priority of the Govt. and direction of its policies are required in letter and spirit.
In conclusion, the justification for universal pension coverage in India is both a constitutional mandate and a moral imperative. As the nation grapples with an aging population, rising inequalities and the challenges of economic liberalization, a "One Nation, One Pension" scheme offers a pathway to equity and social justice. Ensuring economic security for retirees is not just a question of policy but a commitment to the dignity and well-being of every citizen. Policymakers must prioritize this commitment, balancing fiscal responsibility with the need for comprehensive social security.
(The author is a Service Union Representative and a Columnist. Mobile: 9437022669, eMail: samalbruhaspati@gmail.com)
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