Government Major Decision, Final Approval Given to The Old Pension Scheme

There has been a long-standing debate in India regarding the pension system. Millions of employees of the central and state governments have consistently demanded the reinstatement of the Old Pension Scheme (OPS). This issue particularly gains momentum whenever the government makes decisions related to the Pay Commission or pensions. Under the OPS, employees were guaranteed a lifetime pension without any contribution, whereas the New Pension System (NPS), implemented in January 2004, is a market-based and contribution-based model. Amidst this controversy, the government sought a middle ground by implementing the Unified Pension Scheme (UPS).

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Inception and Purpose of the UPS

In light of growing employee dissatisfaction and demands for the reinstatement of the OPS, the central government launched the UPS on April 1, 2025. The UPS is designed as a hybrid model of the NPS and OPS. This scheme is contribution-based, meaning both the employee and the government will contribute funds. It also provides for a minimum guaranteed pension, but the employee must complete a specified service period. The government argues that the UPS will provide social security to employees and will not impose an excessive financial burden on the treasury.

Calls for the reinstatement of the OPS have been raised again

In January 2025, the central government announced the 8th Pay Commission, following which suggestions were sought from employee organizations. These suggestions focused primarily on the reinstatement of the OPS. Employees argue that the NPS is market-based and the pension under it is not fixed, whereas the OPS guarantees a fixed pension for life after retirement. This is why a large number of government employees are demanding the reinstatement of the OPS.

The Government’s Clear Stance

Although employees have repeatedly raised this demand, the central government remains firm on the reinstatement of the OPS. The recent Cabinet meeting approved the Terms of Reference (ToR) for the 8th Pay Commission. It clarified that the new Pay Commission will make decisions keeping in mind fiscal discipline, the economic situation, and government resources. The ToR’s omission to consider non-contributory pensions indicates that OPS is now considered a bygone system.

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The government’s final position on OPS

The government has repeatedly stated that OPS is history and its return is not possible. Some non-NDA-ruled states, such as Rajasthan, Punjab, Jharkhand, and Chhattisgarh, have reinstated OPS, but the central government considers it economically unviable. The Finance Ministry and DoPT maintain that NPS and UPS will remain the basis of the pension system going forward.