AFVOA Newletters of Year 2008

Page 36 of 56 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 recommended 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. (c) 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 Defence, they concluded that the present pension system should prevail and that the future pension liability should be sustainable. The study revealed that whist the number of PBOR was 345832 in 1960 it was 1172623 in 2000 , the rate of grown over 20 years feil from 2.1 to 1.1%, rate or 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.