Pension History and status

1. From the rank based pensions of 1947 when the pension of a Colonel was the same as the Secretary to the Government of India, with higher ranks drawing greater pensions, the downhill continues without a break. This was because a ceiling in the case of civilians was not applicable to the Armed Forces, to what exists today. This paper seeks to put into one place how and why this came about.
2. Regrettably the Indian Armed Forces have lagged behind in their efforts towards enhancing the adequacy of pensions in relation to the truncated career and consequent steep drop in life time earnings. In fact the pension of our personnel has actually declined as percentage of last pay drawn since Independence and today stands lower than the civilian counterparts for the bulk of our personnel. To my mind the reasons for this state of affairs was perhaps due to lack of experience and understanding of the crucial role played by a just and equitable emolument structure in the early post independence years. Thereafter, as we gained experience and knowledge, we concentrated on the pay and allowances of the emoluments at the cost of post retirement benefits. It is only in the past 15- 20 years that we have been alive to this aspect but are unable to make headway on account of difficulties retrieving lost ground.
3. The 3rd Pay Commission started the damage by defining Armed Forces pension as nothing more than something to meet adversity for it stated that with the truncated career it was inconceivable that personnel would spend their remaining working life doing nothing. They did away with rank based pension for officers, changed the weightage to the detriment of everyone.
4. In the early eighties the COSC appointed Major General MEA Krishnan to review our pensions and suggest how to retrieve lost ground. This Report was one of the masterpieces on the subject. A copy was held in the PCC(N) of the 4th and 5th CPC but is no longer around. I think USI should hunt around for a copy to be kept in the library. The COSC sent the report to the MOD after accepting the same. It formed the basis of our memorandum to the 4th CPC.
5. The Government appointed the now famous KP Singh Deo committee. The committee made a large number of recommendations on Ex Servicemen. The Govt. proudly announced in Parliament that it had accepted the majority (90%) of the recommendations. What it failed to accept was return to ONE RANK ONE PENSION done away by the 3rd CPC and that all pensioners irrespective of vintage should draw the same pension for the rank they retired. A committee headed by the Defense Minister with MPs as members however examined it for acceptance and implementation but rejected the OROP. We are however continuing our fight for its implementation..
6. The 5th CPC in Chapter 127 of their Report referred to the Nakra judgment in the Supreme Court. It recorded that it respects the judgment. Pension is not in the nature of alms being doled out to beggars. Retired personnel need to be treated with dignity and courtesy befitting their age. Pension is their constitutional, statutory, inalienable, legally enforceable right earned by the sweat of the brow.
7. The most controversial subject in the field of pension as recorded by the 5th CPC was the glaring disparity of pensions of people of the same rank who retired at different periods. Govt. had tried to solve this problem partially for the Armed Forces by adopting the One Time Increment. This did not meet their demand of One Rank One Pension. The 5th CPC however recommended parity in pensions between pre 1996 and post 1996 pensioners.
8. In our Joint Memorandum to the 5th CPC the Armed Forces had proposed enhancing retiring pension to 75% of last pay drawn. It was felt that due to the truncated career and early retirement Armed Forces personnel suffered considerably on the quantum of entitled pension. Further with the restricted career progression the life time earning differential vis-à-vis the civil services was disproportionately large.
9. Nearly all associations sought similar enhancement ranging from 60 to 100%. The 5th CPC accordingly hired Tata Economic Consultancy Services (TECS) to
(a) Assess the post retirement income requirement taking into account the existing pension structure in private, public and international sectors.
(b) Identify ways and means for payment of pension at higher rates than at present to both civilian and armed forces personnel.
10. TECS study revealed that 65% of last pay drawn would be a reasonable requirement of income by pensioners. Accepting the TECS findings, the CPC felt that since 50% of LPD was already being paid and not to place further burden on the Government, the balance 15% should come from a supplementary Contributory Pension Fund. The two schemes for Pension Funds reccunnenfed by TECS and accepted by the 5th CPC separately for civilian Govt. officials and Armed Forces personnel were (a) Indexed pension scheme for civilians and (b) Unindexed or Nominal pension scheme for Armed Forces personnel. A comparison of the two schemes showed a greater contribution by Defense pensioners attributable to early retirement and longer retired life span.
11. The 5th CPC also quoted a number of foreign armed forces in similar situations adopting the same route. The ADF introduced Pension Fund Schemes in the early 90s. The Malaysians have gone a step further. The Trust created not only provided for additional pension over and above the Govt. contribution but also commercial loans for self employment. A similar scheme for the US Armed Forces by adding on Health care is in vogue. Two pension funds operate successfully in India, namely belonging to ONGC and Air India.
12. The pension funds could be operated Service wise like their GIS in view of difference in size and actuarial parameters. The Services however rejected the concept of pension fund, saying it was for the Govt. to find ways of granting the higher rate of pension.
13. The commonly held belief that the Central Govt. pension bill has the potential to reach unsustainable level does not appear to be based on any realistic assessment of such liabilities in future years. This was the finding of the Director and the Advisor of the Perspective Planning Division, Planning Commission, Govt. of India in their Paper 1/2004-PC of July 2004 titled PENSION LIABILITIES OF THE CENTRAL GOVERNMENT: PROJECTIONS AND IMPLICATIONS. After examining the major accounting departments including Defense, they concluded that the present pension system should prevail and that the future pension liability should be sustainable. The study revealed that whilst the number of PBOR was 345832 in 1960 it was 1172623 in 2000, the rate of growth over 20 years fell from 2.1 to 1.1%, rate of retirement was between 3.3% in 1960 and 3.6 % in 2000, whilst the annual retirees ranged between 11445 in 1960 and 42152 in 2000. Similar figures were computed for officers. It computed the projected employment between 2001 and 2010 under the heads of total numbers, no. superannuating, seeking voluntary retirement, and total retirees. It computed projected pension payments increasing by 7.6 % which was the lowest among civil( 7.6%). Railways (8..1%), Telecom (15.3%) and Post (9.3%). With rises in GDP up to near 9%, it is possible for increases in rates of pension.
14. All this not with standing, the Dept. of Economic Affairs, MOF floated an RFP on 15 Oct 2005 for operationalising the New Pension Strategy. A separate pension fund was proposed to be created for civilians joining after 01 Jan 2004. By excluding Armed Forces it was evident that the Govt. was implementing 5 CPC recommendations for civilians. I responded to the RFP by forming a team of retired officers of all three Services, who were knowledgeable of pensions and had worked with me during Pay Commissions. I felt that NPS was eminently suited to our SSC officers and PBOR. The RFP had been allocated a sum of $ 200000. In my long years in logistics, I had not seen a GOI RFP in a foreign currency. Anyway my RFP response was returned saying that since there was a change in TOR could a fresh response be submitted, which I did. Nothing further was heard and the structure for accounting the recoveries has not been put in place. Where the recovery from the individuals is going for two years is not known.
15. Reverting to the 6th CPC only for pensions, it does not talk of the 5th CPC recommendation for enhancing the rate of pension to 65%. It negates OROP by recording that pension parity has been given by 5th CPC would be suffice. It does not talk of how this pension parity will be maintained, since MSP counts for pension for post 1.1.2006 retirees but is not admissible to pre 1.1.2006 retirees.
16. It has abolished weightage since reference to 33 years service also abolished. It has simplified pension to just 50% of LPD. The edge in commutation has been retained.
17. So where do we go from here?
18. My wish list from the 6th CPC would be as follows for pensions alone
· Rate of retiring pension be raised to 65% as recommended by the 5th CPC and accepted by the Armed Forces. The formation of a service pension fund as recommended by TECS and approved by 5th CPC is not approved as the Government has the capacity to pay ( see paragraph 13 above). In any case whenever increases in rates of pension viz 33% to slab system to the present 50%, no pension fund was talked of or required. Why now.
· Pension parity as recommended by 5th CPC and ratified for continuation by 6th CPC is only hence forth applicable to civilians. With MSP being applicable to only those in service as on 1/1/06 and counting for pension, the post 1/06 retirees will not have parity with pre 01/06 pensioners. This can be resolved by granting an equivalent to MSP as an add on to all pensioners irrespective of vintage.
· In so far as OROP is concerned, there are two dimensions. All pensioners irrespective of vintage but of the same rank must get same pension. This has been largely met till 6th CPC by pension parity. The second aspect is that pension must be rank based as existed till 3rdCPC. This means that all Colonels should have same pension. All MWOs should have same pension.
· SSC officers should receive pension now that 6th CPC has done away with 33 years and weightage.
· Medical insurance should be applicable to pensioners for both OPD treatment and medicines and hospitalization. Medical insurance schemes could managed by respective Service GIS. ESCHS like its counter part CGHS has not proved successful .
· A body like Ex Servicemen’s League with its Governing Council must represent Service pensioners in all matters affecting their interest.
Vice Admiral Barin Ghose
B 449 Sushant Lok I
Gurgaon 122002 Haryana
Phone 124-4044069, Mobile 9871381479
E Mail bag1944@yahoo.co.in