India's Kerala state to put new employees in DC plan despite union opposition

Public employees hired in the southern Indian state of Kerala after April 1 will participate in a defined contribution pension scheme, instead of the defined benefit scheme covering roughly 1 million current employees and retirees.

The state cabinet's decision to put in place a DC plan patterned on the National Pension Scheme the central government launched nine years ago reflects the need to free up more resources for growth and development in a state budget where salaries and pension contributions for government employees currently claim more than 80% of total revenues, said a spokesman for Oommen Chandy, chief minister of Kerala.

In a telephone interview, the spokesman said the change won't affect the 502,675 current employees and nearly 500,000 retirees covered by Kerala's defined benefit plan.

With the cabinet's decision, only two of India's 28 states – Tripura and West Bengal – have yet to switch to a defined contribution scheme, the spokesman noted.

The move has elicited vigorous opposition from public sector unions.

In a telephone interview, A. Sreekumar, secretary of the state's lower-ranking officers union, confirmed that union members would go on strike beginning Jan. 8 to oppose the planned introduction of a DC plan.

Noting the government's failure to meet union demands for guarantees that pensions would cover at least half of employee's salaries in retirement, Mr. Sreekumar said the new scheme would leave government employees at risk of not having adequate resources to live on in retirement.