Why Can’t Tamil Nadu Restore the Old Pension Scheme Instead of CPS and TAPS?

Tamil Nadu’s debate over restoring the old pension scheme has resurfaced amid ongoing criticism of the current contributory pension arrangements, including CPS and the newly introduced TAPS. The central question is why the state cannot simply bring back the older defined-benefit pension model, especially if financial pressure is not the only obstacle.

According to the discussion presented, the older pension system did not exist for all government workers after Independence. In the early years, only a small section of employees received pensions, while more than 95 percent of government staff, teachers, and public-sector workers were covered under a provident fund system. That provident fund model required equal contributions from the government and the employee, and the employee could also borrow against the fund. After retirement, the accumulated savings were paid out as a lump sum. CPS and TAPS are described as modern versions of that earlier provident fund framework.

The article argues that the shift away from the provident fund model was driven by government calculations about long-term costs. A government employee is expected to work for around 30 years, and under a monthly contribution system, the state must keep paying its share every month along with interest costs. In contrast, the old pension scheme would start paying only after retirement, as a monthly pension. From this perspective, the state found the contributory pension structure more attractive because it delayed and reduced immediate expenditure. The increase in the retirement age from 58 to 60 is also linked to this logic, as it allowed the government to postpone pension-related spending for two more years and redirect those funds to other priorities.

The piece further states that, when compared on a continuing-cost basis, the old pension scheme can actually be more favorable to the government than PF-style contributory systems. It claims that CPS and TAPS do not benefit either the government or employees in a meaningful way, and that the real winners are large financial interests. It also says that under the National Pension System used by the central government and most other states, the government’s share and the employee’s share are invested in the stock market through the Pension Fund Regulatory and Development Authority. As of September 30, 2025, the total amount invested through PFRDA is stated to be Rs 11,98,400.85 crore.

The article suggests that this market-linked investment structure is used by major business groups for capital access and therefore benefits large corporations more than ordinary workers. It argues that the continuation of CPS and TAPS is not due to any unavoidable fiscal crisis, but rather to policy choices influenced by institutions such as the World Bank. The central message is that there is no financial barrier strong enough to prevent Tamil Nadu from restoring the old pension scheme; what is needed, the article says, is political will. It concludes that if the government truly wants to do so, it can end CPS and bring back the old pension system.