HOW LONG PENSION FUND CAN SUSTAIN ONLY WITH 10% MANDATORY CONTRIBUTION BY BANKS

[Niranjan Cn]

Sirs,

All of us have repeatedly heard and read from from retiree associations especially AIBPARC informing that there are huge corpus of Pension Fund to take care of Pension Updation and there is no need to debit P & L Account of the Banks.

These statements evoked curiosity, I have spent some time in understanding the Pension Fund.  I referred the submissions made in Supreme court by ARISE/AIBPARC (Synopsis and charts).

 

As claimed by leaders repeatedly, there is sufficient funds are available in Pension Fund, then there cannot be any shortfall.  If there is no shortfall, it is enough for the Banks to contribute manadated 10% of the ‘Pay’ of the working Pension Optees – as per Regulations. 

 

Taking into consideration the above, ie Pension Funds are sufficient/robust – the chart /brief is  prepared from the year ending 2020-21.  From the year 25-26 onwards, the figures were projected and duly explained in the table/assumptions. The ensuing 2027 BPS also factored in.  Further,  the pension paid is exceeding the Interest/income from investments from the year 2020-21 itself for information. 

 

I WAS SHOCKED TO NOTICE THAT PENSION FUNDS TURNS “NEGATIVE” FROM THE YEAR 2032-33 ONWARDS CONSIDERING ONLY 10% MANDATED CONTRIBUTION FROM THE BANKS TOWARDS PENSION FUND.  WHETHER IT IS DESIRABLE ??  WHETHER VIEW OF “ ROBUST PENSION FUND/SUFFICIENT FUNDS IN PENSION FUNDS TO TAKE CARE OF PENSION UPDATION”  – WHETHER HOLDS GOOD ??

 

Is it not a false claim that ‘Present Pension Fund is Robust and can take care of Updation’  ?

Is it required to make false claim – which we cannot prove under any circumstances.  Whom we are trying to mislead ?

 

Hope better sense will prevail.  I will be happy to receive critical comments/analysis on the figures/assumptions made in the write up.

 

Niranjan

Ex Canara

[Kalyanasundaram Subramaniam]

Thank you Mr Niranjan. 

You have taken efforts to show the futility of claiming that there is a bounty corpus fund. But the stalwarts making such a claim do not like to understand or to explain to us their claim. 

Making a statement that pension fund has got surplus to meet enhanced pension payment is totally irresponsible. Or I can say it is out of ignorance.

 

All of us may be good bankers. But it does not mean that we can also be good in all financial matters. Actuary is a separate financial profession. As bankers we do not automatically fit in there.

 

There are only 761 fully qualified Institute of Actuaries of India fellows operating in India, along with roughly 311 associate members. There are over 9000 students. The industry faces a significant shortfall compared to demand with goals to increase the total number of qualified actuaries to 25000 by 2030 to support the growing insurance sector.

 

Actuaries estimate the pension fund corpus (the total money a bank needs to set aside today) using a structured process grounded in finance, statistics, and risk modeling.

They take into account various factors like

• Employee data: age, salary, years of service
• Pension rules: retirement age, benefit formula (e.g., % of last salary)
• Life expectancy (mortality assumptions)
• Probability of early retirement, resignation, or disability
• Inflation, rate of interest, exchange rate etc.

It is a complicated process to arrive at a figure. Some assumptions may go wrong. That is why every year the estimated corpus fund is revisited and confirmed by actuaries and chartered accounts in the balance sheet.

 

Without any proof, accusing banks of having excess corpus fund may be okay for a non-finance man, but not for bankers with three or four decades of banking experience.

 

Generally, bankers are used to be blamed for making window-dressing by reducing their outgo to various provisions. But here it is the other way round. They are accused of transferring more funds from P&L to Corpus fund. Strange. 

 

S Kalyanasundaram 

[Harish Midha]

In a layman's understanding,do you mean to say that henceforth there will be no BPS and the existing staff will not get any increase .

Is not the Govt of India / State Govts giving good increase no t only to the existing staa but also to their retirees.

And how about RBI which gets major income

by way of dividend from PSBs 

Am just thinking from logic point of view. 

Kindly enlighten and suggest a practical SOLUTION.

Am a scale 2 pensioner drawing pension of 27-28 k since 1994 .

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[Harish Midha]

*inspite of deficit budgets and huge liabilities.

Hoping and praying that Hon'ble Supreme C ourt in its wisdom and arguments iby legal experts gives a judgement favouring pensioners would not the respected the so called whatsup professors not accept whatever raise is going to be there by saying that it will affect adversely the fund position of bank

A humble suggestion- if the resp what'sup professors can their intelligent minds to find and put forth their energies to find ways and mobilise support towards achieving the desired favourable result so it may provide some relief to their brothers and sisters who are facing huge constraints in this late age.

[JSOMA SHEKARA]

Mr.Niranjan

Why do you worry about pension funds too much? Leave the headache to the banks. If it is one rupee or one billion they will manage. They have taken hair cuts of more than lakh crores in NPAs. They are paying arrears to RRB pensioners from Date of retirement. Banks also paid several crores of Rupees to pensioners by way of interest in 2018. We have returned bank contributions and pension funds belongs to the Bank. Shortage, negative or excess they will manage. 

AIBRF and AIBPARC both are stooges of AIBEA and  AIBOC. Pensioners are not fools to get mislead by them. 

UFBU itself is misleading pensioners.  if we agree that AIBPARC is misleading by filing appeal based on Reg35/1. then on what basis AIBOA a part of  UFBU has filed case for updation in Bombay High Court. Is it not a plan to continue claiming sub judice in case M C Singla case is disposed?

We have grievances with Banks, IBA and UFBU. AIBPARC and AIBRF should conduct demos in front of premises of

these authorities. What is the fun in conducting dharnas in marriage halls?

But please note nobody van mislead us.

The truth is

1. There is no need  for the existence of provision for updation in BEPR 1995, for UFBU to discuss  and negotiate updation with IBA. If agreement is reached  Banks will amend pension regulation later.

2.  CHV i s not the right authority to declare there is no funds for updation. UFBU job is to discuss and negotiate a scheme and Banks will provide funds. Cost can be negotiated. Pre 2002 retirees have not got revision of basic for the last 30 years. For others, the basics has been updated two or three times. Considering these factors a reasonable scheme may be devised. Sri. C N Prasad has already suggested a formula to CHV.

If we hide these facts we are also misleading pensioners.

Let Retiree associations make huge claims. They are not negotiating authorities.

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