The Old Pension Scheme (OPS) has engaged explosive conversations across India that involve both civil servants and policymakers. The revival of the scheme, which once ensured a robust financial sustenance post-retirement, is now a glimmer of hope for many. With the introduction of the unified pension scheme (UPS), the pension landscape has transformed significantly as transformative changes are on the horizon. This article investigates the most recent updates and discusses the implications of OPS, situating it within the ongoing transformations for serving employees and those retiring.
Transitioning From NPS To UPS
The introduction of the National Pension System (NPS) in 2004 replaced the Older Pension Scheme (OPS) as pensions would now be linked to market performance. Employees raised concerns about the unpredictability of NPS, which increased demands for a return to the OPS. The Union Cabinet responded by granting approval for the UPS on 24 August 2024, with the rollout date set for 1 April 2025. This scheme blends modifications of both OPS and NPS to provide a more robust and secure pension framework. Unlike the unfunded OPS, the UPS is fully funded which guarantees fiscal sustainability as there are defined employee and employer contributions. The UPS, unlike OPS, is fully funded ensuring fiscal sustainability.
Guaranteed Pension Benefits
The UPS guarantees pension benefits with 50% of average basic remuneration for associated employees for 25 years of service. Employees with service years ranging from 10 to 24 are eligible for a proportional pension with a guaranteed minimum of 10,000 for a 10-year minimum service period. Retirees are further entitled to a lump sum payment and periodic dearness relief to counter inflation. This alleviates the financial insecurity for NPS subscribers which was a major concern with NPS.
Contribution And Flexibility
Under the UPS, there are both employee and employer contributions. The employee is now required to contribute 10% while the government contribution is set to 18.5% with a possibility to change based on actuarial recommendations. This model distinguishes it from OPS which was non-contributory.
Retirees and employees hired post-2004 have the option to shift to the UPS, which provides greater flexibility when compared to the NPS. Nonetheless, some unions, while appreciating the UPS, still push for a non-contributory OPS.
State Governments’ Response
Some opposition-ruled states decided to revert to OPS, considering employee dissatisfaction with the NPS. Even so, in lagged states, cautious implementation has been driven by fiscal concerns. There are state governments that are more interested in the ergonomics of the UPS, which indicates that the potential adoption could extend to employees outside the centre. Such an integrated system would benefit the equity of pension distribution among different age groups across the country.
Pension Comparison Table
| Scheme | Pension Basis | Contribution | Minimum Service | Minimum Pension |
|---|---|---|---|---|
| OPS | Last drawn pay | Non-contributory | 10 years | Not specified |
| NPS | Market-based | Employee + Employer | Not specified | Not guaranteed |
| UPS | Average basic pay | 10% employee, 18.5% employer | 10 years | ₹10,000/month |
Ongoing Discussions And Future Outlook
The debate around the different pension systems in the country continues to evolve, and OPS reinstatement remains the goal of employee unions. In July 2023, T. V. Somanathan led the government’s committee with the rest of the members assigned to resolve complaints that shaped the UPS. Through these ongoing discussions, employees are advised to keep checking the news via their associations for the latest information.
A conclusive determination concerning the restoration of OPS is pending; however, the implementation of OPS is a noteworthy advancement in the attempt to harmonise security and sustainability.
Also Read: Cheque Bounce New Rule 2025: Jail Term Doubled, Faster Notices & Digital Courts Launched