Palaniswami’s refusal to commit himself to Old Pension Scheme shows that it is unfeasible

AIADMK general secretary Edappadi K. Palaniswami’s refusal to commit himself to the restoration of the Old Pension Scheme (OPS) for the State government employees and teachers reflects his realisation that it is unsustainable in the long run.

While interacting with journalists in Salem on the Pongal day (January 15), Mr. Palaniswami was asked whether he would go back to the OPS in the event of his party’s victory in the Assembly election. His reply was that a decision would be taken “depending upon the situation”. He added that his party would make “only those promises that are feasible”. At the same time, he criticised the ruling DMK for not having lived up to its 2021 electoral assurance on the OPS.

Chief Minister M.K. Stalin announced a few weeks ago that his government would implement the Tamil Nadu Assured Pension Scheme (TAPS), a mix of the OPS, the Unified Pension Scheme (UPS) of the Union government, and the Andhra Pradesh Guaranteed Pension Scheme (APGPS). The TAPS, envisaging the payment of a monthly pension, has retained the element of contribution, as found in the Contributory Pension Scheme (CPS) or the National Pension System (NPS). About 10 days ago, the Tamil Nadu government issued an order that the new scheme came into force on January 1.

In the last five years or so, there has been a trend among certain States to revert to the OPS. States such as Rajasthan, Jharkhand and Chhattisgarh have announced their return to the OPS. However, the Reserve Bank of India and several economists have been cautioning the State governments in general against reverting to the old scheme, arguing that the move would result in accumulation of unfunded liabilities in the coming years.

Moreover, as pointed out by the Tamil Nadu government’s White Paper presented in August 2021, the government had resorted to borrowing in the past even for items of non-discretionary spending that included pension payment, one of the significant components of the committed expenditure.

With the increasing life expectancy, the number of pensioners and family pensioners in the State has been stabilising at about seven lakhs for quite some time. The demographic data of the pensioners reveal that between 2017 and 2025, the strength of the pensioners, aged 80 and above, rose by 1.7 times — from 41,489 to 1,13,380. It is no wonder that the year-on-year growth of pension and other retirement benefits has generally been in double digit.