Thread by @BahlKanan

Debate on the Old Pension Scheme (OPS) vs New Pension Scheme is very hot😲

The financial impact is very complex to understand🤔

I've researched for 10+ hrs, so you don't have to🥂

A thread🧵👇

In this thread, we'll cover:

[1] How is pension calculated?
[2] How much does it cost to the centre & state govts?
[3] What part of Budget goes towards pensions?
[4] What if we bring back OPS and how sustainable it is?
[5] If no, then what else can be done?

Please read this with an open mind as I'm not biased:

🔶 My Grandfather received pension and it used to be his pride

🔶 My father has been a pvt sector employee all his life

🔶 I am a young guy, and I've been equally close to both ideologies - Pensioner and Pvt Sector employee

[1] How is pension calculated?

-Basic pay can vary, but let's assume 30-40% of Gross Salary

-Pension is 50% of last drawn Basic Sal.

-So, Pension is ~15-20% of last Gross Sal.

For example,
🔶 Last Gross sal.: ₹1,00,000 p.m
🔶 Basic Sal.: ₹40,000 p.m
🔶 Pension: ₹20,000 p.m

Q. Is this the pension that retired govt employee receives till his/ her death?

A. This pension increases from time to time

As per government estimates of the increase in inflation (dearness allowance)

So, does this liability end on the death of employee? Read to know👇

Q. Does pension end on the death of govt employee?

A. No! My grandpa passed away in Dec'21

My grandma still receives a part of what grandpa used to receive & liability of govt will continue till my grandma is alive

In very rare cases, children of deceased are also eligible

[2] How much does it cost to the centre & state govts?

Centre's expense on Pension increased from:
🔶 81,803 Cr. in 2004-05
🔶 4,23,804 Cr. in 2021-22
10.2% CAGR📈

State expense on Pension increased from:
🔶 37,378 Cr. in 2004-05
🔶 4,06,867 Cr. in 2021-22
15% CAGR📈

Contd👇

This increase is pension despite the fact that govt decided to stop the OPS in 2004-05

Centre's pension bill exceeded its salaries bill in FY20🤯

Not just centre but following 3 states spent more on pension than existing salaries & wages:
🔶Gujarat
🔶Karnataka
🔶West Bengal

[3] What part of Budget goes towards pensions?

Pension expense as % of all state govts revenue has increased from:
🔶15.8% in FY05 to
🔶21.6% in FY22

For centre, it has decreased from 19.9% in FY05 to 17.8% in FY22E

All this despite govt stopping to commit OPS to new joiners

Interesting fact: Himachal Pradesh paid ~80% of their revenues to just pension

Now you have to pay for salaries, interest on borrowings and what not

What will be left for even basic maintenance? Not even talking about development

[4] What if we bring back OPS and how sustainable it is?

I completely understand the grievances of Govt employees that NPS isn't sufficient for survival in retirement

But you can see, these numbers will drown us an economy in the next 5-10 years if we bring back OPS

This will eventually have to stop

What will you choose?

A. Country faces financial crisis like some neighbouring country? or

B. Let the expenses be spent towards development?

[5] If no, then what else can be done?

I know survival is tough and expenses are high

The govt employees may assess their financial goals and invest in:
🔶Mutual Funds via SIPs and
🔶Provident Fund and other debt instruments

Also, consider no withdrawal from NPS on retirement

As a goodwill gesture, the govt should stop rolling out pensions to MPs and MLAs

If a former MP or MLA becomes a minister again, he is eligible for pension as well as his salary as a minister

This also needs to stop!

What do you think? Tell me👇

If you like this analysis and want me to keep doing it,

[1] Follow me @BahlKanan and hit the bell icon🔔
[2] Retweet the first tweet. Link👇

https://twitter.com/BahlKanan/status/1630456711583764482?s=20

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#Oldpensionscheme #ScrapNPS_RestoreOPS #NPS #OPS #NationalPensionScheme

Just added some relevant hashtags, not my view