Bank unions have deferred their strike to demand a five-day work week as the Indian Banks' Association (IBA) has agreed to negotiate their demands. Apart from shorter work weeks and reduced workload, the other significant demands of the unions relate to pension.
The unions want the government to restore the old pension scheme for all bank employees and the national pension scheme (NPS) not be made mandatory. Other demands included an updation and revision of pension.
What is NPS?
The NPS is National Pension Scheme or
System that is contribution-based and is regulated by the Pension Fund Regulatory and Development Authority (PFRDA). It is open to all employees from the public, private, and even unorganised sectors, except for those in the Armed Forces.
NPS has been in place for central government employees since 2003 and was made mandatory for all recruits to the central government (except the Armed Forces) from January 1, 2004.
NPS scheme subscribers can make a minimum contribution of Rs 6,000 in a financial year, which can be paid as a lump sum or as monthly instalments of a minimum of Rs 500. The money is invested in market-linked instruments. The current interest rate range of NPS is 8-10 percent on the contribution made, as per a PolicyBazaar article.
Government employees make a monthly contribution at the rate of 10 percent of their salary and a matching contribution is paid by the government. For central government employees, the employer’s contribution rate was increased to 14 percent from April 1, 2019.
How is it different from the old pension scheme?
The old pension scheme was a defined benefit plan funded by the government. It specified how much pension the government was liable to pay on retirement based on the last drawn salary.
Moreover, the pension was adjusted for inflation with periodic Dearness Allowance (DA) and pay commission revisions.
Why bank unions don’t want NPS?
The new pension scheme only specifies how much the employer and employee contribute to an employee's retirement account. The returns are market-linked.
The investment risk in the old scheme is borne by the government whereas, in the new scheme, it is borne by the employee.
Another issue with the scheme is even after retirement, one cannot withdraw the entire sum but only 60 percent. It is mandatory to keep aside at least 40 percent of the accumulated fund to receive a regular annuity from the PFRDA registered insurance firm. The remaining 60 percent of the accumulated fund is tax-free.
Basically, the unions want a pension scheme that provides more security for them. That’s why bank unions are demanding that the NPS be rolled back and the old pension scheme be restored.
What bank unions are doing?
The United Forum of Bank Union (UFBU), an umbrella body of nine bank unions, including All India Bank Officers' Confederation (AIBOC), All India Bank Employees Association (AIBEA), and National Organisation of Bank Workers (NOBW) had threatened to go on strike on June 27 to press for issues related to pension and the demand for five-days-a-week work.
However, the strike was deferred as Indian Banks' Association (IBA) agreed to initiate negotiation talks on their demands.
What states are doing?
Rajasthan and Chhattisgarh have announced a reversion to the old pension scheme for their staff in lieu of the new pension scheme.
Reports also suggest Punjab, Tamil Nadu, and Jharkhand were mulling implementing the old pension scheme.
