Think about the peace of mind that comes with a steady monthly pension for life that won’t decline due to market conditions. The Old Pension Scheme (OPS) has served as a safety net for Indian government employees, ensuring financial assurance after retirement. With the turn of the year 2025, the conversations about the revival of OPS are intensifying. We take a look into one of the major updates from the changing pension policies and their implications for the Indian employees.
Brief Synopsis Of The OPS
The OPS provided to government employees until 2004 provided peace of mind as it guaranteed a pension with eased retiring and was equal to 50 percent of the last drawn salary. Funding for the OPS was entirely government-sponsored; unlike the NPS (New Pension Scheme) the OPS did not require any contributions, and was a non-contributory scheme. Despite the replacement of OPS, it is now recommended to bring back OPS due to the market-linked NPS and the absence of any guarantees.
OPS: Why The Advocacy?
Under the terms of the National Pension Scheme (NPS), employees are required to contribute 10% of their salary with an additional 14% paid by the government. The NPS’s heavy reliance on market performance has become a point of contention. For instance, employees in the private sector are worried about the future prospects of NPS. This is further aggravated by OPS reverting back to Rajasthan and Chhattisgarh. This has heightened calls for a more universal rollback.
The central government, on the other hand, is trying to keep a balance and is heavily resorting to fiscal aid, and is slowly facing the heat to take a more decisive step.
The Unified Pension Scheme (UPS) Emerges
On August 24, 2024, the Union Cabinet gave the green light to the Unified Pension Scheme (UPS), set to launch on April 1, 2025. The UPS is a blend of OPS and NPS, providing a guaranteed pension of 50% of average basic pay over the last year for employees with 25 years of service. Employees with 10-24 years are entitled to a proportionate pension, with a minimum of ₹10,000. UPS differs from OPS in that it mandates a 10% employee contribution, with the government providing a matching 18.5% contribution.
Key Features Of UPS
UPS provides a family pension which allows the spouse to continue receiving 60% of the employee pension post their demise. The UPS also provides periodic dearness relief to counter inflation. Additionally, employees receive a lump-sum payment at retirement with gratuity, which makes the UPS more attractive. Employees on NPS and retirees post-2004 can switch to UPS. This pension policy hybrid seeks to enhance employee security while managing costs for the UPS.
State Governments’ Stance
Opposition-ruled states have chosen to restore OPS, but implementation has been slow. The UPS from the central government is seen as a compromise. States are urged to formulate their versions of the UPS. Contrary to this, employees’ unions, while supportive of UPS, demand a non-contributory OPS, claiming any deductions compromise the benefits.
What Lies Ahead?
As of May 2025, there are still no conclusive discussions regarding the complete restoration of OPS.
The government has entered a precarious phase wherein it has to uphold economics while maintaining employee satisfaction. Workers should monitor official updates and should only participate through their unions. The conversation is still very much active, as there is a demand for OPS and the UPS seems to be a middle-ground solution.
Also Read: LIC Smart Pension Plan 2025: A New Era Of Retirement Security Begins