Contributory pension: State's borrowings prevent government employees from exiting scheme

Thiruvananthapuram: Despite the Contributory Pension Review Committee clarifying that there is no legal hurdle in exiting the scheme, the State government employees would be unable to do so in the present circumstances.

The government has borrowed money assuring that the scheme would be continued, effectively closing the window that would allow employees from opting out of the scheme.

The central government decided to provide additional borrowings to States that continued the Contributory Pension Scheme after several others revoked the scheme. In some States, withdrawing from the scheme was even a promise made in the election manifestos of political formations, prompting the Centre to offer the incentive.

Kerala had borrowed Rs 1,755.82 crore from the Centre on a written assurance that the Contributory Pension Scheme would be continued. The State would be availing a loan of Rs 1,755.5 crore this financial year also.

The central government clarified last March that permission for additional borrowings would not be granted for States that had withdrawn from the scheme. It also made it clear that the deposits of employees from such States in the National Pension Scheme (NPS) corpus would not be returned.

However, the Contributory Pension Review Committee's report asserted that the deposits would be returned.

Incidentally, the State government has not yet forwarded the file — still with the office of Finance Minister KN Balagopal — to a ministerial-level committee, constituted to study the Contributory Pension Review Committee's report.

The State's argument that several technical issues have been preventing the withdrawal of deposits from the Contributory Pension Scheme fell flat after the committee's report was made public on Monday.

Pro-CPM service organisations have been asserting that the Pension Fund Regulatory and Development Authority (PFRDA) Act should be revoked to withdraw deposits from the scheme. The NGO Union even took out a rally in Delhi last week, demanding the withdrawal of the Act.

However, it became clear that the deposits could be withdrawn without repealing the Act after the committee's report was made available to the Joint Council of State Service Organisations based on a Supreme Court order.