Unified Pension Scheme is calculated move to offload state's responsibility
Cloaked in the rhetoric of reform and progress, the Unified Pension Scheme (UPS) is being touted as a significant step towards securing the financial future of retirees. However, beneath this polished exterior lies a troubling reality the scheme is a subtle but calculated attempt to transfer the burden of social security from the state to the individual, paving the way for privatisation.
In doing so, it undermines the very foundation of a welfare state, where social security should be a fundamental right guaranteed by the government, not a commodity subject to market fluctuations. As India navigates its demographic dividend, the imperative for a robust public pension system is greater than ever. Yet, the UPS threatens to unravel this promise, prioritising private profits over public welfare. It is crucial to critically examine how this seemingly benevolent policy masks a deeper neoliberal agenda that prioritises market dynamics over the rights and dignity of its citizens.
The introduction of the UPS by the Indian government is being heralded as a landmark reform, promising security and stability for retirees. Yet, beneath its polished veneer lies a more sinister reality. The UPS is not the progressive solution it purports to be; rather, it serves as a facade for advancing neoliberal agendas. By subtly shifting the burden of social security onto individuals and creating avenues for privatisation, the UPS could undermine the very essence of public welfare. This scheme is more about serving market interests than protecting the rights and dignity of retirees.
At first glance, the UPS appears to be a balanced compromise, offering the predictability of the Old Pension Scheme (OPS) alongside the flexibility of the market-linked New Pension Scheme (NPS). However, this balance is deceptive. The UPS encourages lump-sum withdrawals and investment in private financial products, nudging retirees away from the public safety net. As observed by India Today, the scheme's design incentivises retirees to put their trust in private markets, not in the state. What comes in the garb of a choice is a carefully crafted nudge towards privatisation. By incorporating market-based elements, the UPS lays the groundwork for a gradual but decisive move away from public pensions towards private profit.
The UPS is nothing more than a market-based neoliberal solution to the genuine need for reform. It operates under the guise of offering choice and flexibility, yet it fundamentally reshapes the social contract by making individuals responsible for their retirement security. This shift from collective responsibility to personal responsibility is a classic neoliberal tactic, which prioritises market mechanisms over public welfare. The UPS introduces market dynamics into what should be a public guarantee, thereby facilitating a slow but steady erosion of state responsibility. It is a calculated strategy to inject privatisation into the realm of social security, using the hard-earned money of government employees to fuel private market growth.
For those who understand the basics of a welfare state, it is clear that social security is not a privilege; it is a fundamental right. The state must ensure that its citizens can retire with dignity, free from the uncertainties of market fluctuations. The UPS, however, abdicates this responsibility, shifting the burden onto individuals. By doing so, it not only exposes retirees to market risks but also diminishes the role of the state in safeguarding the well-being of its people. This is a dangerous precedent, one that undermines the social fabric by placing individual gain above collective welfare. The burden of social security should be borne by the government, reflected in its budget, and not offloaded onto the shoulders of retirees.
The UPS erodes the principle of social solidarity that is at the heart of public pension systems. Pensions are a social right, not a financial product to be commodified. They are designed to ensure that all members of society, regardless of their economic status, can enjoy a secure and dignified retirement. The UPS, shifts this narrative towards individual financial planning, eroding the concept of collective responsibility. This shift not only undermines public pensions but also weakens the social bonds that hold communities together. By prioritising market-based solutions, UPS transforms retirement into a commodity, stripping away its social significance.
As of 2024, India’s working-age population, which includes individuals aged 15 to 64, constitutes a significant portion of the total population. Approximately 65% of India’s population falls within this age group. This demographic characteristic is notable because it suggests that India has a large potential workforce, often referred to as a “demographic dividend”. With more people in the workforce compared to dependents (children and elderly), the dependency ratio is relatively low. A lower dependency ratio means fewer financial pressures on the working population to support non-working groups. This creates an opportunity for the government to allocate resources towards building a sustainable social security system without overburdening the working population.
While the current focus is on the working-age population, planning for the future is essential. As life expectancy increases, the elderly population will grow, potentially creating a higher dependency ratio in the future. The current demographic dividend gives the government time to plan and implement robust pension and healthcare systems. With a younger population now, the government can gradually introduce and expand social security measures, building reserves and frameworks that will be crucial as the population ages in the coming decades. This foresight could prevent a crisis when the working-age population starts to decline.
By encouraging individuals to opt for lump-sum withdrawals and invest in private schemes, UPS channels public funds into private hands. This is not just a shift in policy; it's a shift in values. It represents a move away from the idea that the state has a duty to protect its citizens, towards a model where individuals are left to fend for themselves in the market. The UPS uses the hard-earned savings of government employees to feed into private capital markets, turning public welfare into a tool for private profit. This is a clear betrayal of the principles of social security and public trust.
The Unified Pension Scheme is not the progressive reform it is made out to be. It is a facade, masking a deeper agenda of neoliberalism and privatisation. By shifting the burden of social security from the state to the individual, the UPS undermines the very foundation of public welfare. Social security must remain a part of the government budget, reflecting the state’s responsibility to its citizens. The UPS, in its current form, is a betrayal of this responsibility, turning social security into a marketable asset rather than a guaranteed right. It is imperative that we see through this and advocate for a pension system that prioritises social equity, collective responsibility, and the welfare of all citizens, not just the interests of private markets.
The Unified Pension Scheme, under the guise of offering choice and flexibility, is a direct assault on the principles of social justice and collective welfare. By shifting the responsibility of retirement security from the state to individuals, the scheme promotes a neoliberal agenda that commodifies social security, transforming it into a tool for private gain. In doing so, it erodes the solidarity and social cohesion that are vital to a just society. As India stands at a demographic crossroads, the government must resist the allure of privatisation and reaffirm its commitment to the welfare of all citizens.
As and when the details and the fine points are made public, we can do the number crunching to estimate the most beneficial scheme in terms of market value, but that is not the most important point, what needs to be understood is that social security should be a non-marketable, non-negotiable public right, enshrined in the state’s responsibilities. It is not supposed to be a market-driven gamble. To ensure a future where every retiree can live with dignity, we must challenge the UPS and advocate for pension reforms that prioritise social equity, uphold the public good, and safeguard the rights of the most vulnerable. The time to act is now before the Trojan horse of UPS dismantles the essence of our social contract.
Dr Shirin Akhter is an associate professor at Zakir Husain Delhi College, University of Delhi.
