{"id":210811,"date":"2022-10-17T20:13:22","date_gmt":"2022-10-17T14:43:22","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=210811"},"modified":"2022-10-17T20:13:22","modified_gmt":"2022-10-17T14:43:22","slug":"making-a-case-for-the-old-pension-scheme","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/making-a-case-for-the-old-pension-scheme\/","title":{"rendered":"Making a case for the Old Pension Scheme"},"content":{"rendered":"\n

Source<\/strong>: The post is based on an article\u00a0\u201c<\/strong>Making a case for the Old Pension Scheme\u201d <\/strong>published in\u00a0The Hindu<\/strong>\u00a0on\u00a017th<\/sup> October 2022<\/strong>.<\/p>\n

Syllabus: GS 2 \u2013 <\/strong>Governance<\/strong><\/p>\n

Relevance:\u00a0<\/strong>benefits of old pension scheme<\/strong><\/p>\n

News:<\/strong> The governments of Rajasthan and Chhattisgarh, Punjab has announced to revert back to the Old Pension Scheme (OPS) form the New Pension Scheme (NPS).<\/p>\n

What is Old Pension Scheme (OPS) and New Pension Scheme (NPS)?<\/strong><\/h5>\n

OPS is an assured inflation-indexed monthly family pension till a government employee or her spouse live(s). The OPS payment level is linked to the last pay an employee drew while in service.<\/p>\n

Whereas, the NPS is the amount that an employee can draw as a pension after retirement. Its value is determined by the market value of the contributions made by the employee.<\/p>\n

What are the benefits of Old Pension Scheme (OPS)?<\/strong><\/h5>\n

First,<\/strong> the pension drawn in NPS is lower than the OPS (Chart 1).<\/strong><\/p>\n

Second, <\/strong>NPS is dependent on the market prices of equity\/bonds in which the amount is invested. Therefore, a crash in the markets can affect the pensioners.<\/p>\n

Whereas, OPS is a fixed government expenditure irrespective of an economic slowdown or a stock market crash. This makes it useful in counter-cyclical policy measure during a crisis.<\/p>\n

What are the arguments against OPS?<\/strong><\/h5>\n

It has been argued that the OPS acts as burden on the exchequer <\/strong>as it accounts for 25% of the States\u2019 budget.<\/p>\n

However, it may not be correct because three other parts of States\u2019 revenue receipts (tax the Centre collects on behalf of the States, non-tax revenue that the States collect and non-tax grant that the Centre shares with the States) have not been taken into account.<\/p>\n

Therefore, if OPS expenditure is calculated correctly then it would be half of 25%. (Chart 2A)<\/strong><\/p>\n

Further, the share of pensions falls when the revenues (as a share of State GDP) go up. Therefore, the government should focus on increasing the revenues rather than cutting the expenditures.<\/p>\n

How can government focus on increasing the revenue for OPS?<\/strong><\/h5>\n

Government earns revenues mostly from the indirect taxes and the share of direct taxes is low. (Chart 3)<\/strong><\/p>\n

Therefore, government can focus on increasing the revenues by increasing the direct taxes (ex-corporate taxes) to ensure proper pension can be given to all.<\/p>\n

Further, income can also be generated from property and wealth taxes which are almost zero at the present.<\/p>\n","protected":false},"excerpt":{"rendered":"

Source: The post is based on an article\u00a0\u201cMaking a case for the Old Pension Scheme\u201d published in\u00a0The Hindu\u00a0on\u00a017th October 2022. Syllabus: GS 2 \u2013 Governance Relevance:\u00a0benefits of old pension scheme News: The governments of Rajasthan and Chhattisgarh, Punjab has announced to revert back to the Old Pension Scheme (OPS) form the New Pension Scheme (NPS).… Continue reading Making a case for the Old Pension Scheme<\/span><\/a><\/p>\n","protected":false},"author":10320,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230,9],"tags":[212,10498],"class_list":["post-210811","post","type-post","status-publish","format-standard","hentry","category-9-pm-daily-articles","category-public","tag-gs-paper-2","tag-the-hindu","entry"],"jetpack_featured_media_url":"","views":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/210811","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10320"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=210811"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/210811\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=210811"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=210811"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=210811"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}