For the past few years, a large section of government employees has believed that the Old Pension Scheme (OPS) provided them with greater security after retirement. Under OPS, a fixed pension was received after retirement, which increased according to inflation and pay commission recommendations. Employees did not have to worry about market fluctuations, as the entire responsibility rested with the government. This is why employee organisations have been continuously demanding the restoration of OPS.

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Increased hope from states that have restored OPS

States like Rajasthan, Chhattisgarh, Punjab, Jharkhand, and Himachal Pradesh have reinstated OPS. After these decisions, the discussion intensified about whether the central government would also bring back the old pension system for its employees. In this context, direct questions were asked of the government in Parliament.

What did the government say in Parliament?

Minister of State for Finance Pankaj Chaudhary clarified in Parliament that there is no proposal to restart OPS for central government employees. The government’s focus remains on the National Pension System (NPS) and the Unified Pension Scheme (UPS). This statement has largely put an end to the speculation surrounding the return of OPS.

What are the fundamental differences between OPS, NPS and UPS?

The Old Pension Scheme was a completely government-funded system, where employees received a fixed pension based on their last drawn salary. In contrast, the NPS, implemented from January 1, 2004, is a defined contribution scheme where both the employee and the government contribute, and the amount received at retirement depends on market returns.

Subsequently, the government introduced the UPS, which was implemented from April 1, 2025. The UPS attempts to combine the stability of OPS with the structure of NPS.

What benefits will employees get from UPS?

Under the Unified Pension Scheme, central government employees will receive 50 percent of the average of their last 12 months’ salary and dearness allowance as a pension after retirement. This also includes family pension, dearness relief, and inflation-linked indexation. A provision for a guaranteed minimum monthly pension of Rs. 10,000 after at least 10 years of service has also been made.

Option to switch from NPS to UPS

The government had given employees enrolled in the NPS the option to switch to the UPS, with the facility to return to the NPS if needed. A deadline of November 30, 2025, was set for this. According to the government, more than one lakh central government employees have already opted for the UPS.

Why states implementing OPS will not receive NPS funds

The question was also raised in Parliament whether states that have implemented OPS will receive the funds accumulated in the NPS. The government clarified that under the PFRDA Act, there is no provision for returning the accumulated contributions and returns from the NPS to the states. This means that states that have restored OPS will not receive the NPS funds deposited with the central government.

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What will happen to the contribution amount in UPS?

It was also clarified regarding the UPS that there is no provision for directly returning the contributions deducted from employees’ salaries upon retirement. However, the employee or their spouse will have the option to withdraw up to 60 percent of the total corpus, but this will reduce the monthly pension amount.