Concerned over the "rising and unsustainable" pension bill accounting for half of expenditure on pay and allowances, the Economic Survey on Wednesday warned that the situation is bound to "worsen" with increase in longevity.

Complementing the new pension system notified last year by the previous NDA government, the pre-Budget Survey, presented by Finance Minister P Chidambaram in Parliament, said the new scheme would enable government and its employees to share the pension burden equally.

Economic Survey 2003-2004: Complete Coverage

Pension bill rose from Rs 2,138 crore (Rs 21.38 billion) in 1990-91 to Rs 14,496 crore (Rs 144.96 billion) in 2002-03 and further to Rs 15,466 crore (Rs 154.66 billion) in 2003-04, the survey said, adding "pension is one of the fastest growing items of expenditure."

"The expenditure on pension is now almost 50 per cent of the expenditure on pay and allowances. With increasing longevity, the situation is bound to worsen," it said.

Concerned over the rising and unsustainable pension burden, the government had introduced a new defined contribution pension system for new recruits from January.

Under the new scheme, government employees have to contribute 10 per cent of their salary and dearness allowance, which would be matched by the central government.

The existing scheme of pension, GPF and gratuity would continue for existing employees of the central government.

The Pension Fund Regulatory and Development Authority will regulate the pension market.

"The new pension system has portability, allowing transfer of benefits in case of change in employment," the survey noted.