Cash-strapped Govt to set up pension fund

Speaking to The Indian Express, P K Brahma, Additional Secretary (Pensions), said the department was contemplating various measures to deal with the huge pension expenditure. “We have to formulate some measures. As part of this we plan to set up a pension fund which could be managed privately we need to prepare a policy paper which will be cleared by the Ministry of Law and the Ministry of Finance since it will involve fundamental changes in service rules,” he said.

Defence accounts for nearly 19.27 lakh pensioners and the Railways 8 lakh. The pension liability of the Government is Rs 12,000 crore for Defence and Rs 5,314 crore for the Railways.

Sources say with the number of pensioners increasing steadily, the Government is left with no alternative but to set up the pension fund which will invest in the markets to maximize returns.

Because of the pension burden, the Cabinet had recently turned down a proposal to give one per cent additional pension for every year of service after 33 years. Saying that it would place an “unacceptable burden on the exchequer”, the Cabinet accepted the Department of Pensions’ recommendation that the proposal be turned down.