Pension Liabilities of the Central Government: Projections and Implications

The commonly held belief that the Central government pension bill has the potential to reach an unsustainable level does not appear to be based on any realistic assessment of such liabilities in the future years. The future pension liabilities of the Central Government would be primarily driven by the structure and behaviour of employment in the Central Government in the past and the structure of prevailing pension system. This paper applies theoretically established models to the available time series on employment to estimate the growth in number of pensioners and make realistic projection of the future pension liabilities of the Central Government comprising five accounting departments such as Railways, Defence, Posts, Telecommunication and Civil. On the basis of these estimates it is concluded that if the present pension system prevails, the future pension liability of the Central Government would be reasonably sustainable. [Planning commission WP 1/2004]