History of Pension as a retirement benefit and its variants
In our country, pension as a retirement benefit to the employees of the
Rulers/Government, is centuries old. However, the Royal Commission on Civil
Establishments, in 1881, provided for the well-defined rules for payment of
pension to the government employees. The Government of India Acts of 1919 and
1935 made further improvements in the Pension Rules.
Later historical background of pension paid to the Central Civil Services Employees is elaborately described in the Fourth Central Pay Commission Report. It states that as a result of the recommendations of the First Central Pay Commission, the Pension rules, 1950, were notified on April 17, 1950, with an option to those who had entered permanent pensionable service before October 1, 1938. On the basis of the reports of subsequent Central Pay Commissions, the Scheme was liberalised and notified as “the Central Civil Services (Pension) Rules 1972”. The Civil Pension Commutation Rules, 1925, were replaced by the Central Civil Services (Commutation of Pension) Rules, 1981. The Pension was paid to those who had opted for the pension in lieu of the Employer’s Contribution to Provident Fund. The Central Government issued several circulars advising the employees to opt for pension in lieu of EPF and finally vide the Office Memorandum dated 1st May 1987 issued by the Department of Pension and Pensioners Welfare, included all the employees in the pension scheme barring those who had specifically given their consent to opt for EPF scheme. The Pension Schemes of the employees of other departments/ establishments and the employees of the various State Governments were also enacted on the basis of the CCS Employees’ Pension Scheme. During the period of late eighties, there was a growing demand from the employees of the Central Public Sector Undertakings to allow them pension as the main retirement benefit. The Central Government had advised the CPSUs to introduce Employees’ Pension Schemes in lieu of EPF and accordingly with the prior approval of the Central Government, Boards of such CPSUs approved pension scheme in lieu of EPF to their employees and made the Pension Regulations for their employees. Thus, the Pension Scheme for the employees in the Central PSUs was introduced.
In LIC, some of the employees’ unions were demanding Pension as the
third retirement benefit that is pension in addition to EPF, which was not
accepted by the Central Government. But, on the pressing demand from a larger
section of the employees, all the employees’ unions agreed to the pension
scheme in lieu of EPF in 1994 and accordingly, the LIC of India (Employees)
Pension Rules, 1995 came into existence. As the terms and conditions of service
of the employees of LIC of India are decided by the Central Government under
Sec 48 (2) (c) of LIC of India (Amendment) Act, 1956, the aforesaid Pension
Rules were also made by the Central Government.
In a number of CPSUs, the pension scheme in lieu of EPF was not
implemented either because of laxity on the part of the management or
non-acceptance of the scheme by the employees’ unions, so the scheme of EPF
continued therein. With the falling interest rates and increased demand for a perennial
source of income after retirement from the employees of such CPSUs and also
from the employees of the factories and other establishments to which the
Employees' Provident Funds and Miscellaneous Provisions Act, 1952 was
applicable, the Central Government in exercise of its powers conferred by
Section 6A of the Employees' Provident Funds and Miscellaneous Provisions Act,
1952 (19 of 1952), made the Employees' Pension Scheme, 1995. This scheme is applicable
to the organizations/undertakings whose employees are covered by PF and
Miscellaneous Provisions Act, 1952.
Thus, there are three types of pensions schemes as stated below:
i.
Pension Schemes in lieu of EPF, governed by the Rules
made by the Central Government or State Governments,
ii.
Pension Schemes in lieu of EPF, governed by the
Regulations made by the Boards of respective organizations with prior approval
of the Central Government, and
iii.
Pension Scheme made by the Central Government under
EPF & Miscellaneous Provisions Act, 1952.
All the aforesaid Pension Schemes are made either by the Central
Government/State Governments or by the Boards of the organization under the
provisions of relevant Central Act and broadly they come under the category of
sub-ordinate legislation. Each Scheme has got its own rules/regulations clearly
defining the eligibility, formula, procedure, etc. of payment of pension. The
pension schemes covered under (i) and (ii) above, are close ended. Those have
been substituted by the National Pension Schemes with effect from 1/1/2004 for
category (i) and 1/4/2010 for category (ii).
LIC of India (Employees) Pension Scheme, 1995 is made by the Central
Government. It is a funded scheme fully contributed by LIC. There is a provision
of additional contribution to the Pension Fund by LIC for upward revision, but
the Central Government has not approved the resolution passed in November 2001 by
LIC Board for pension updation. LIC (Employees) Pension Scheme is not based on
memorandum signed by employees’ representatives or LIC Management/GOI. So,
despite its being a funded scheme (not a ‘pay as you go’ scheme), it is similar
to the CCS Pension Scheme, as it is enacted by the Central Government and is
not based on any settlement/memorandum. Pension Schemes of employees of GIPSA
are also similar to the LIC Employees pension schemes. Here, it would be
appropriate to understand what is meant by the term ‘governed by rules made by
the Government’. Hon’ble Supreme Court held in “Roshan Lal Tandon vs
Union Of India” (1967 AIR 1889, 1968 SCR (1) 185 held that the status of the
employees governed by the rules made by the Government is different from that
of the employees governed by the terms and condition of service decided by
mutually agreed settlement. The emolument of the Government servant and his
terms of service are governed by statute or statutory rules which may be
unilaterally altered by the Government without the consent of the employee.
Though the employees of LIC do not claim to be government employees, the terms
and conditions of their service are governed by the rules made by the Central
Government, which are unilaterally altered by the government without the
consent of the employees. So their proximity, with regard to applicability of
the pension rules, is obviously to the Central Government Employees.
These days, there is a plenty of information about pension related
issues, whether the judicial pronouncements or executory orders, posted on the social
media, which sometimes creates confusion. With a view to have clarity about whether
a post is relevant to our issues, the main schemes of pension as the retirement
benefit are discussed here.
i.
Pension Schemes of Government Employees: These are the
Pension Schemes enacted by the Government to make payment of pension in lieu of
EPF. Pension Scheme of Central Civil Services employees, Railways Employees,
Defence Personnel, etc. and Pension Schemes of State Government Employees come
under this category. Pension Rules for these Pension Schemes are made by the
Central Government/State Government. Pension is paid on ‘pay as you go’ basis
from the consolidated fund of India/consolidated fund of the state.
ii.
Pension Schemes in lieu of EPF of the employees of
PSUs: These are the pension schemes enacted by the respective board of the PSU
with prior approval of the Central Government. Unlike in LIC, where the Pension
Scheme is not based on Memorandum signed by the LIC and the representatives of
employees, in PSU Banks, the Pension Schemes are based on the memorandum signed
by the representatives of the employees and Banks. These are the Funded Schemes
i.e. a pension Fund is created by the employer and pension is paid from the
pension fund. The pension fund is fully contributed by the employer. Pension is
paid by purchasing annuities.
iii.
Pension Schemes under EPF & Miscellaneous
Provisions Act, 1952. The pension scheme is enacted by the Central Government
for the employees who are governed by the Employees Provident Fund and
Miscellaneous Provision Act, 1952. It is a restricted fund contributory pension
scheme, where a portion of contribution of EPF is utilized to create a pension
fund along with the contribution of the employee and the central government.
Important features of the said schemes are
shown in the table given below:
|
Pension Scheme |
Made by |
Type of Scheme |
Type of Fund |
Remark |
|
Govt. Employees’ Pension Schemes |
Government |
‘Pay as you go’ from
Consolidated Fund |
No Pension Fund |
Pension Revision with wage
revision |
|
LIC/GIPSA Emp. Pension
Schemes |
Central Government |
Funded Scheme |
Non-Contributory |
Non-restricted Fund but no
pension revision |
|
PSUs Bank Emp. Pension
Schemes |
Respective Boards |
Funded Scheme |
Non-contributory |
Non-restricted Fund but no
pension revision |
|
EPF & MP Act, 1952
Pension Scheme |
Central Government |
Funded Scheme |
Contributory |
Restricted Fund, no pension
revision |
As stated above, each type of pension scheme is governed by its specific
rules/regulations. Anomalies/inconsistencies observed in these schemes, from
time to time, are removed by suitable amendments. Almost in all type of pension
schemes, one or another provisions causing discrimination has been
challenged in courts of law, which is tested on judicial scrutiny and decided
on merits. A judgment given in one type of pension scheme may not necessarily
be applicable to other type of the scheme. Therefore, while citing a ruling,
not only type of pension scheme but also resemblance of issues have to be kept
in mind. A reference that merely states a decision of the Court and nothing about
the issues involved has a greater likelihood of being frustrating rather than
persuading. The doctrine of precedents helps only when the similar or identical
question of law is raised before the court.
Thus, the discerning readers will appreciate that not all but only those
judgments, which have got resemblance of the issues and identical law points will
serve as the precedents in our case. Following couplet from Bhartruhari Neeti
Shatak guides us appropriately:
रे रे चातक ! सावधान मनसा
मित्र क्षणं श्रूयताम् ।
अम्बोदा बहवो हि सन्ति
गगने सर्वेअपि नैतादृशा: ।।
केचिद् वृष्टिभिः
आद्रयन्ति वसुधां गर्जन्ति केचिद् वृथा ।
यं यं पश्यसि तस्य
तस्य पुरतो मा ब्रूहि दीनं बचः ।।
O My Friend Chatak (a mythological bird associated with rains)! Be
attentive and listen to me carefully for a few moments. There are so many
clouds in the sky but all are not alike. A few of them make the earth wet by
bringing the showers but a few make noises only. Therefore, do not beg to every
cloud you see in the sky.
M P Agnihotri
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