Unfunded old pension scheme tax on future generations: EAC member

New Delhi, December 26

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Concerned over the revival of the old pension scheme (OPS) by certain Opposition-ruled states, Economic Advisory Council to the Prime Minister (EAC-PM) member Sanjeev Sanyal on Monday said an unfunded pension scheme was ultimately a tax on future generations.

Can’t undo reforms

One should be very, very careful to reverse pension reforms that have been done with great difficulty over the last couple of decades. Sanjeev Sanyal, Member, EAC-PM

Sanyal said given the current stress in the global economy and the repeated downgrades to the world GDP growth numbers by ratings agencies, it was quite obvious that 2023 would also be a difficult period. “It should be clear that an unfunded pension scheme is ultimately a tax on future generations. Therefore, one should be very, very careful to reverse pension reforms that have been done with great difficulty over the last couple of decades,” he said.

Sanyal was responding to a question on some Opposition-ruled states’ decision to switch to the old pension scheme. The OPS, under which the entire pension amount was given by the government, was discontinued by the NDA government in 2003 from April 1, 2004.

Under the New Pension Scheme, employees contribute 10 per cent of their basic salary towards pension while the state government contributes 14 per cent.

Three Congress-ruled states, HP, Rajasthan and Chhattisgarh, have already decided to implement the OPS. Jharkhand too has decided to revert to the OPS, while AAP-ruled Punjab recently approved its reimplementation.

On India’s overall macroeconomic situation, he opined apart from the problems in the eastern Europe, a sharp surge in Covid cases in China would possibly have spillovers on rest of the world’s economic growth.