Bankers Demand Choice in Pension Fund Selection Under NPS

Public Sector Bank (PSB) employees have intensified their demand for the right to select their pension fund managers and investment schemes under the National Pension System (NPS). While employees in central & state governments, autonomous bodies, Regional Rural Banks (RRBs), IDBI bank, the Reserve Bank of India (RBI) and other Public Sector Undertakings(PSUs) already enjoy these options, PSB employees remain excluded. The issue has sparked widespread discussions and a social media campaign under the hashtag #NPS_Discrimination.

Two Pension Scheme Options Available Since 2019

The NPS offers two key investment choices to subscribers from April 1, 2019. One is Active Choice, where employees can actively select their investment ratio among asset classes, including equity (class E), corporate debt (class C), and government securities (class G). The other option is Auto Choice, where investments are automatically adjusted based on the subscriber's age, shifting from higher equity exposure during youth to safer options like government securities as they approach retirement. This flexibility is already accessible to Central Government employees and workers in central autonomous bodies.

(The letter from PFRDA to the IBA Chief on choice of pension funds.)

Corporate Model Allows Employer or Employee Choice

In December 2011, the NPS Corporate Model was introduced, allowing corporate employers to either centralise pension fund selection for all employees or permit individuals to choose their own pension funds and schemes. Despite directives from the Indian Banks’ Association (IBA), PSB managements have not granted employees this option, leaving pension fund selection in the hands of employers.

The Ministry of Finance, through its Department of Financial Services(DFS), has communicated guidelines encouraging flexibility, but implementation remains stalled at the PSB level.

Unequal Treatment Sparks Campaigns

Employees of PSBs argue that the lack of choice in pension fund management creates inequality. While comparable employees in other financial institutions and government bodies have autonomy, PSB employees are denied this flexibility. Social media platforms, particularly X (formerly Twitter), have seen significant traction for the campaign #NPS_Discrimination. Employees claim this disparity undermines their financial planning for retirement.

Few screenshots from the campaign  #NPS_Discrimination:

Union Efforts Yet to Bear Fruit

Several unions representing public sector bankers, including the All India Bank Officers' Confederation(AIBOC), have presented formal representations to management and the IBA. Despite these efforts, there has been no definitive response or policy change from the bank managements. 

However, banking union leaders express their reservations with the shift to NPS. All the major unions demand the withdrawal of NPS and switching back to the old pension scheme. But, they also agree with the demand to align PSB policies with other sectors, ensuring parity and empowering employees with the investment choice. But, the United Forum of Banking Unions(UFBU)- the representative of the bankers in negotiations with the IBA, has not taken up the issue for discussion yet.

(AIBOC’s letter to the Chief of IBA(copied to all affiliates) demanding a Choice of Fund option in NPS for bankers.) 

The growing demand for equality in pension fund selection underscores a broader need for transparent and inclusive policies under the NPS framework. As employees continue to voice their concerns and seek parity, the issue remains a significant talking point among PSB staff, unions, and financial regulators.