The Hindu Business Line : Pension option: Actuaries’ report lifts staff hopes

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Pension option: Actuaries’ report lifts staff hopes

The report said that it would cost the public sector banks around Rs 6,000 crore, if they were to allow the second pension option.

M. Ramesh

Chennai, Nov. 13 About 2.6 lakh employees of public sector banks are likely to get a second chance to opt for pension instead of a lumpsum payment at the end of the service. This likelihood emerges from the expenditure estimates submitted by the two actuaries appointed jointly by the Indian Banks Association and the bank unions.

The actuaries (Mr D. Basu and Mr K.P. Sarma) have said in their report that it would cost the public sector banks around Rs 6,000 crore, if all the 2.6 lakh employees (currently under the provident fund scheme) surrender the balance in their PF accounts and opt for the pension scheme.

This amount is slightly higher than the estimate (Rs 4,700 crore) made by an actuary appointed by the unions, but is drastically lower than IBA’s initial estimate of Rs 28,000 crore.

Unions in favour

The unions are enthused by the actuary’s report because they feel that the banks’ managements cannot deny employees the “second option” on the grounds that it is too expensive. “After all, Rs 6,000 crore for about 25 banks is not much of a burden,” says Mr G.D. Nadaf, General Secretary, All India Bank Officers’ Confederation.

The first time an option was given to bank employees was in 1993. Back then, many employees preferred to stick to the ‘contributory provident fund’ scheme, because at that time the interest rates were quite high and they would have earned more from interest on the terminal benefits than the pension.

But later the situation changed. Interest rates began to fall and pension began to look attractive. Today, about 2.6 lakh of the eight lakh employees of the public sector banks are under the PF scheme.

For a number of years now, bank employees have been demanding that they be given another chance to opt for the pension scheme. “Other government organisations such as the Railways, have given their employees more than one opportunity to choose between pension and provident fund,” Mr Nadaf told Business Line.

Asked how there could be such a huge variation between the initial estimates of the IBA and of the actuaries, Mr Nadaf said that the actuaries first appointed by IBA calculated pension liabilities on the basis of “what it would be if all the bank employees retired today”.

He said that even the Rs 6,000-crore burden would have been lesser if banks had been providing towards pension payments as they are supposed to do.

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