There is also one unfunded programme - the Civil Servants Pension Scheme (CSPS), which is a non-contributory, pay-as-you-go pension system administered by both the central and state governments. For two of the schemes, the CSPS and EPS, the government is likely to face significant long run contingent liabilities. The situation is difficult in the case of central government departments’ viz., defence and railways.
The pension bill is estimated to be about 25 per cent above the wage bill, which represents a hidden cost. Although, the EPS is, in principle, funded, it is unlikely that it is going to be financially sustainable in the long run as its defined benefit promises too high a rate of return on contributions.