The ruling UDF government has decided to implement the scheme of contributory pension to all government employees joining service after April 1, 2013. While there have been isolated voices of protest from the opposition side, it is pretty much certain that the contributory pension scheme, which has been already taken up by the Centre since January 1, 2004, is the path forward for the governmental bodies, if they are to keep up with the changing times that have become increasingly competitive over the years.
Contributory Pension scheme involves two tiers - Tier 1 being mandatory and Tier 2 being non-mandatory. In Tier 1, the account is a strictly a non-withdrawable account, into which the person is required to remit 10% of his monthly earnings through out his term of employment in the government sector. The government too would contribute an equal share into the account. The amount can be withdrawn only after the person reaches retirement age.
Each person is obliged to do a minimum period of service for the government to be eligible for receiving the pension through the Tier 1 account. Once withdrawn, the person is also required to invest 40% of his pension money to purchase an annuity from an IRDA (Insurance Regulatory and Development Authority) regulated life insurance company. This would ensure that the person receives a fixed amount as pension on a monthly basis for his/her lifetime and for his dependents.
The option of having a Tier 2 account is left to the discretion of the employee and can be used more like a personal bank account from which money can be withdrawn anytime. There will be no contribution from the government's part towards this account. There will be options to transfer money from Tier 2 account to Tier 1, but not the other way around. There is also no minimum time period required in service regarding transaction through the Tier 2 account.
At present, the pension scheme involves the government virtually taking care of all its employees all through their life after retirement, and after that, their dependents. This scheme was devised at a time when the government operated bodies were more or less the only source of employment for the people. Back then, it automatically became the duty of a people’s representative government to take care of its citizens who were reeling from poverty and unemployment.
The process of globalisation saw the economy opening its doors to private investors and slowly the government has been backing out - intentionally in some sectors, while being forced in some others – from the different sources for revenue generation. While the onset of private participation in sustaining the economy has considerably lessened the burden on the government, with decreasing revenues, it has also effected in the governing body loosing part of its lustre and prominence as being the ultimate in the hierarchy of power.
The way out for the government is to emerge stronger, with more influence and resources, and to take the corporate giants at their own game. For this there is a dire need for the government to find more money to make capital investments in vital sectors with the twin interests of generating revenue and to maintain an influence over the decisive factors regarding the state's economy. And the contributory pension scheme is one of the steps initiated to bring more capital to the government.
As stated in the article released from the Chief Minister's office, Kerala has more pensioners than employees. While the longer life span of Kerala's population is definitely a factor for the rise of this situation, it has also to do with the fact that the later generation of the population wasn’t solely dependent on the government for providing them with jobs and a means of living. And Kerala at present has one of the highest per capita income and per capita consumption rate in the country. In short, the people are no longer dependent on the government the way they were half a century ago.
The overall debt of the state stands at Rs. 88,746 crores, with Kerala spending 90.34% of its revenue on salaries, pensions and interests on debts. The situation cannot be allowed to go on, because the very existence of the public sector is at stake. Till now, the public sector has been relegated largely as 'non-competitive' sector simply because it belonged to the government and the government never needed to compete. But the emergence of private players with a prominence on par with the government has brought in a situation where the government has no option but to compete and get ahead to maintain its supremacy as the policy maker of the state.
By implementing the contributory pension scheme, the government is actually taking a step back from what was considered its primary duty - that of providing financial security to it citizens. But the move is only logical, one that is being demanded badly by the changing times. Presently, the condition is such that the government needs to take care of itself more than it needs to take care of the people. So, to maintain the integrity and eminence of the governing body after a period of sixty years, implementing of the contributory pension scheme comes in as a move that is more a necessity than an option.