Over the last few weeks, the National Pension Scheme has repeatedly become a topic of social media debate. Countless individuals have taken to Twitter railing against the scheme and insisting that the Old Pension Scheme be brought back.
The topic is not new, with NPS having replaced the OPS in 2004. It was first made mandatory for all Central government employees, before being expanded to the states. While the government insists that OPS will not be reintroduced, protests have refused to die down. Hashtags such as "NPS Quit India" and "Restore Old Pension" continue to trend on social media, with many insisting that the new scheme is a risky prospect.
But why is there a problem with the National Pension Scheme? Under the defined benefit pension system applicable to government servants appointed before April 1, 2004, a pension is calculated based on the qualifying service and the last pay drawn by the employee. Under the NPS, individual savings are pooled into a pension fund which are invested by the government's Pension Fund Regulatory and Development Authority.
Simply put, the NPS does not provide a guaranteed pension or a fixed pension amount and is linked to the market. Subscribers are allowed to invest their pension corpus in government bonds, corporate bonds and equities. As such, the benefits they receive depend on several factors including the entry age and contribution, their chosen investment pattern and the accrued investment income. A defined benefit on the other hand means that the pension is fixed and determined with reference to the years of service and salary.
"NPS is a kind of mutual fund and yes that line...'Mutual Funds are subject to market risk'. So, after whole service life, our retired life is at risk of Markets, Which we all know is being manipulated. Old Pension scheme is our RIGHT. So #RestoreOldPension," demanded one Twitter user.
"The hard earned capital of our life is deposited in the stock market. We do not even know how much amount will be received on retirement," claimed another.
Even amid the criticism however, the NPS remains one of the fastest growing provident funds in India. Even as countless individuals protest against the scheme, others appear to see it as a lucrative prospect. Considered one of the lowest cost pension products in the world, it had nearly 14 million subscribers at the end of 2020, with over Rs 5,34,188 crore of assets under management.