Old Pension Scheme : After nearly two decades, the Old Pension Scheme (OPS) has made a dramatic comeback, bringing immense joy and relief to lakhs of government employees across India. The scheme, which was discontinued in 2004 in favor of the New Pension Scheme (NPS), is now being reintroduced by several state governments amid mounting pressure from employee unions and political groups. This move marks a significant policy shift aimed at ensuring financial security post-retirement for public sector workers.
What is the Old Pension Scheme?
The Old Pension Scheme (OPS) is a government-backed retirement plan that offers defined benefits to employees after their retirement. Unlike the New Pension Scheme, which is market-linked, OPS ensures a guaranteed monthly pension based on the employee’s last drawn salary and years of service.
Key Features of OPS:
- Guaranteed pension post-retirement
- No mandatory contribution from the employee
- Pension is 50% of the last drawn salary or average of last 10 months’ salary
- Full dearness allowance (DA) applicable on the pension
- Family pension in case of employee’s death
- Government bears the pension liability
Why Was OPS Discontinued?
The Central Government replaced OPS with NPS in 2004 for all employees joining service from January 1, 2004 onwards. The aim was to reduce the financial burden of pensions on the exchequer, which was steadily increasing due to the expanding workforce and longer life expectancy.
Key Reasons for OPS Discontinuation:
- Unsustainable pension liabilities
- Fiscal strain on government budgets
- Shift towards a contributory and market-linked model
- Recommendation by global financial institutions for reforms
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States Reinstating Old Pension Scheme
Several states have now opted to bring back OPS citing employee welfare and rising dissatisfaction with NPS. This move has gained political traction as well, becoming a hot topic ahead of elections in many states.
States that Have Officially Reinstated OPS:
| State | Year of Reinstatement | Eligible Employees | Remarks |
|---|---|---|---|
| Rajasthan | 2022 | Employees joined after 2004 | Full switch to OPS approved |
| Chhattisgarh | 2022 | All state government staff | Budgetary allocation made |
| Punjab | 2023 | Govt staff under NPS | Notification issued for OPS |
| Himachal Pradesh | 2023 | Employees opted for OPS | OPS operational |
| Jharkhand | 2023 | Employees under NPS | Govt order issued |
| West Bengal | Ongoing | NPS never implemented | All employees still under OPS |
| Andhra Pradesh | 2024 | Likely post elections | Proposal under active consideration |
Employee Reactions and Benefits
The return of OPS has sparked widespread celebration among government employees and unions. The assurance of a fixed pension with DA has been the primary demand for years.
Major Benefits of OPS Over NPS:
- Fixed monthly pension, not market dependent
- Greater post-retirement financial security
- Eligibility for family pension
- Full DA benefits even after retirement
- No need for personal financial planning post-retirement
Employee Unions Welcome the Move:
- Long-standing demand fulfilled after 19 years
- Provides dignity and peace of mind after decades of service
- Union leaders calling for central government to follow suit
Comparison: Old Pension Scheme vs New Pension Scheme
| Feature | Old Pension Scheme (OPS) | New Pension Scheme (NPS) |
|---|---|---|
| Type of Scheme | Defined Benefit | Defined Contribution |
| Pension Amount | 50% of last salary (fixed) | Depends on market returns |
| Government Liability | 100% | Partial |
| Employee Contribution | Nil | 10% of Basic + DA |
| Market Dependency | No | Yes |
| Family Pension | Available | Available but with lesser benefits |
| Risk Factor | Very Low | High (market-linked) |
| Tax Benefits | Taxable after retirement | Partially exempt under 80C and 80CCD |
Challenges and Criticisms
While many employees welcome the return of OPS, economists and policy analysts have expressed concern about the long-term impact on public finances.
Key Concerns:
- Heavy fiscal burden on state governments
- No contribution from employees increases government liability
- May affect funds for education, health, and infrastructure
- Politically motivated, not financially viable
- Could set a precedent for rollback of other reforms
Will Central Government Also Revert to OPS?
As of now, the Central Government has not shown any inclination to reintroduce OPS for its employees. However, pressure is mounting from employee unions and political groups. A Parliamentary Standing Committee recently recommended a hybrid model offering both security and flexibility.
What Experts Suggest:
- A middle path combining OPS benefits with NPS contributions
- Pension reforms with better risk management
- Public awareness and informed choices for employees
- Sustainable pension funding mechanism
The return of the Old Pension Scheme after 19 years is a landmark move, bringing joy and security to thousands of government employees. While the debate over its sustainability continues, the policy reversal underscores the need to balance fiscal discipline with social welfare. As more states consider rolling back NPS in favor of OPS, all eyes are now on the Central Government’s next step.
This article is for informational purposes only. Readers are advised to refer to official government circulars or consult with financial/legal experts before making any decisions related to pension schemes.
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