The old pension scheme will not be implemented.
Lakhs of government employees across the country have been demanding the restoration of the Old Pension Scheme (OPS) for a long time. But the latest stance of the Central Government seems to put an end to this hope. The government has made it clear that the OPS era will not return, rather the New Pension Scheme (NPS) and the Unified Pension Scheme (UPS) will be the way forward.
Where did the debate start?
In January 2004, the Central Government abolished the old pension scheme and implemented the National Pension System (NPS). It is a contributory system, in which both the employee and the government contribute a part of their salary. But in OPS, the entire pension was given by the government, which was non-contributory and guaranteed. Now when the number of retired employees increased, OPS started becoming heavy for the government.
After 21 years, amid increasing demand from employees, the Center implemented the new UPS scheme from April 1, 2025, which includes some features of both NPS and OPS. It will be necessary to contribute to UPS, but a minimum guarantee of pension will also be given.
OPS issue raised again in 8th Pay Commission
Employee unions again made the withdrawal of OPS a major issue before the 8th Pay Commission. But the Central Government reiterated its position that no consideration is being given to the withdrawal of OPS. Recently, the terms of reference of the 8th Pay Commission were approved in the cabinet meeting chaired by Prime Minister Narendra Modi. One point in these conditions gave a clear message that there is no possibility left on OPS.
Big hint hidden in the terms of Pay Commission
According to the new terms, the Commission will have to consider the unfunded cost of non-contributory pension schemes while formulating its recommendations. This means that the government considers those schemes as financially unsustainable, where the entire burden falls on the government exchequer. The same model was applicable in the old pension scheme and that is why it was called financially unsustainable and unbalanced.
UPS and NPS: Future Pension Policy
According to a report by FE, the central government is now looking at NPS and UPS as more transparent and sustainable pension systems. UPS will have an investment system like NPS, but at the same time employees will be given a minimum pension security, so that stable income can be ensured after retirement. The government believes that this model will be balanced for both the employees and the economy.
Why is the return of OPS difficult?
An FE report said that according to financial experts, if OPS is implemented again, there will be tremendous pressure on the government budget. In many states, pension expenditure has already reached 20 to 25 percent of the total budget. If the Center also returns to OPS, there may be a shortage of funds for development schemes and welfare projects.