The Old Pension Scheme (OPS) continues to be a point of contention for both employees of the government and the leaders in India. The introduction of the Unified Pension Scheme (UPS) and the talk of reverting back to OPS has put 2025 in the limelight for new changes that may alter the retirement landscape for millions. This article aims to explain the changes of 2025 and provide clarity on the updates and expectations.
From OPS To UPS
As with every problem in the OPS system, it was also replaced with a new system. In 2004, OPS was replaced with the New Pension Scheme (NPS) which also offered a traditional pension with no security. The Union cabinet decided to approve the UPS on 24th August 2024 which would be active from 1st April 2025. 2025 was set to be the shift year for OPS and a mixed model NPS with traditional pension features for more reliability will be offered to employees of the central government.
Key Features Of The Unified Pension Scheme
Under the UPS, employees who have worked for 25 years get 50% of the average basic pay for the last 12 months. Employees who have worked for 10 to 24 years are entitled to a proportionate pension, capped at ₹10,000 monthly. The pension is supplemented with a family pension of 60% of the member’s pension, and periodic dearness relief adjustments. Additionally, unlike the unfunded OPS, UPS has a mandatory employee contribution of 10% and a government match of 18.5%.
Why Employees Still Demand OPS
Many employee unions are still fighting for a return to a full OPS. There are complaints about how the NPS works, as it’s too dependent on the market, and the UPS, while better than the NPS, is still a deduction from take-home pay. Unions believe the non-contributory OPS is better for overall financial well-being. A few states, especially those governed by opposition parties, have reverted to OPS, putting more blame on the central government.
Updates From May 2025
Work towards restoring OPS has been actively discussed in 2025. In 2023, a committee led by T.V. Somanathan made significant updates regarding the pension policy, and has since been restructuring the OPS and UPS frameworks. Still, there has been no announcement on the OPS decision. Employees are encouraged to follow official government communications and keep in touch with union updates to be the first to know when any progress has been achieved.
Financial Challenges With OPS Restoration
Restoring OPS is anticipated to worsen the government’s financial outlook and also face budget cuts in the future. This is because OPS is an unfunded pension, whereas UPS is fully funded and attempts to avoid providing employee pensions and benefits at the cost of fiscal responsibility. Budget constraints, such as those in the states of Rajasthan and Himachal Pradesh, further illustrate the contradictory complexities of OPS.
| Aspect | Old Pension Scheme (OPS) | New Pension Scheme (NPS) | Unified Pension Scheme (UPS) |
|---|---|---|---|
| Pension Type | Fixed, non-contributory | Market-linked, contributory | Fixed, contributory |
| Pension Amount | 50% of last-drawn salary | Varies with market | 50% of average basic pay |
| Service Requirement | 10 years minimum | No minimum specified | 10 years minimum |
| Family Pension | 60% of employee’s pension | Varies | 60% of employee’s pension |
| Effective Date | Pre-2004 | Post-2004 | April 1, 2025 |
The pension landscape will change over time, with 2025 being a more defined year in discussions. More updates that can change the paradigm of retirement security are awaited.
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