The revival of the Old Pension Scheme (OPS) has been a controversial issue that raised its head again in 2025 when central employees of the government demanded a clarity on the retirement benefits. Unions and a few states are pushing back toward it, but the Centre is wary.
What is Old Pension Scheme?
The Old Pension Scheme is defined benefit scheme, which promises the retired employees with a 50 per cent of their final drawn salary together with Dearness Allowance adjusted yearly with inflation. Under OPS payouts are guaranteed to the beneficiaries and their families at no market risk.
Government’s Position in 2025
Finance Minister Nirmala Sitharaman told parliament in August 2025, that no such proposal is under consideration to restore OPS to employees under the National Pension System (NPS) which covers central government employees. The reason moving away to OPS in 2004 was because it was causing unsustainable fiscal burden to the exchequer3.
Unified Pension Scheme as an Alternative
To improve the aspect of retirement security under NPS, Unified Pension Scheme (UPS) was launched on January 24, 2025. UPS provides central government employees with a defined benefit of 50 per cent of the 12 months average basic pay (after 25 years of qualifying services). Shorter tenures are on a pro-rata basis. Even the death invalidation, or disability during the service may attract benefits under CCS (Pension) Rules, 2021 and Extraordinary Pension Rules, 2023 among UPS members.
State-Level Reinstatements
Some state governments, including Rajasthan, Chhattisgarh and Himachal Pradesh have already restored the OPS to their employees following call made by the unions and the local financial estimates. These actions speak of the diverse practices within India at the same time when no one appears to be committed by the central government.
Key Takeaways for Employees
- No central plan to bring back OPS under NPS.
- UPS provides a middle path with defined benefits and fiscal sustainability.
- OPS remains active for employees recruited before January 1, 2004; post-2004 recruits fall under NPS/UPS.
- States hold discretion to restore OPS regionally, affecting local government staff.
OPS vs NPS/UPS at a Glance
| Feature | OPS (Old Pension Scheme) | NPS/UPS (New/Unified Pension Scheme) |
|---|---|---|
| Benefit Type | Defined benefit: 50% of last salary + DA | UPS: Defined benefit of 50% of average basic pay after 25 years; NPS: Market-linked |
| Employee Contribution | None | NPS: 10% of salary; UPS: same as NPS contributions |
| Government Liability | High unsustainable fiscal burden | UPS designed for fiscal sustainability; NPS defined-contribution |
| Eligibility | Central recruits before Jan 1, 2004 | NPS: recruits from Jan 1, 2004; UPS option available to all NPS members |
Also read: Retirement Age Hike 2025: Central Government Employees Get Two-Year Extension