PensionIndia

The other day there was this news item about the New Pension Scheme (NPS) that reminded me of a tale from the Panchatantra. The news item was about the recommendations that the parliamentary standing committee on finance had made about the Pension Bill and here's the story that it reminded me of.

A small female mouse was going about its timid way when an eagle scooped it up in its claws. However, as the eagle flew along, it accidentally dropped the mouse into the hands of a sadhu. The holy man had no children, so it turned the mouse into a girl and brought it up as his daughter. The years went by and the girl grew up to be a great beauty. When she became of marriageable age, the sadhu decided that it wanted a powerful son-in-law. His first choice was obviously the sun, whose light powers the whole world. However, the girl was not enthusiastic about the match. She said that the sun was too hot. So, the sadhu asked the sun if anyone else was as powerful as him.

The sun pointed to clouds since they could cover and dim its glory. But, the girl said the cloud was dark and cold. The sadhu then asked the cloud if there was anyone better than him. The cloud said the wind could blow him away whenever it wanted to. But the wind wasn't quite the mate that the girl was looking for. She said that the wind was too fidgety.

The doting father, not having access to matrimonial websites, asked the wind to suggest a better match. The wind pointed to the mountain, who could stop the wind. However, the girl thought the mountain to be too rough. Now, it was the turn of the mountain to make a suggestion. The mountain thought about it and said that it had to be the mouse, because the mouse could bore a hole through the mountain. The girl liked this option. The mouse was willing too, and the sadhu heaved a sigh of relief. He then fulfilled his filial duty by turning the girl back into her original form and marrying her off to her chosen husband. So, the mouse girl became a mouse again.

Meanwhile, the parliamentary standing committee on finance has recommended that the New Pension Scheme be converted into a guaranteed returns system with returns at least equal to that offered by EPFO. I guess it doesn't matter that we've just had about a decade's worth of activity focused on the fact that the government cannot continue funding pensions. That India must switch to a defined contribution system and that this would incidentally also solve the problem of the unorganised sector's retirement benefits.

The whole point of pension reforms was that even though the government couldn't guarantee a pension, a long-term, market-linked system could provide enough safety with superior returns. In any meaningful way, the recommendation that the new system must be based on a government guarantee means that it's back to the drawing board, with the additional problem that the only way of solving the original problem has now been ruled out.

Source : ET ( Article by Dhirendra Kumar )n