Union Budget 2024: For years, central government employees who joined central services, except armed forces, before 2004 have been demanding restoration of the Old Pension Scheme (OPS), which was replaced by the National Pension System back then.
Ahead of the Union Budget 2024-25, the Modi government has received several proposals to scrap the NPS and bring back the OPS for employees of various government services.
Amid growing demands for the restoration of the OPS, the Modi government is expected to approve a proposal on guaranteed pension for central government employees, if not fully scrapping the NPS. Various media reports indicate that Union Finance Minister Nirmala Sitharaman may announce in her Budget 2024 speech a guarantee of 50% of employees’ last-drawn salary as pension under the NPS, which replaced OPS.
This move follows concerted efforts by central government employees advocating for improved pension payouts under NPS. Central trade unions had previously met with Sitharaman, urging the reinstatement of OPS.
Union Budget 2024: Will OPS Vs NPS debate continue or get settled?
Under the Old Pension Scheme, retired government employees receive a lifelong pension equivalent to 50% of their final salary, adjusted periodically based on pay commission recommendations. As a ‘defined benefit’ plan, the OPS guarantees a fixed pension amount without requiring employee contributions during their service.
In contrast, the NPS operates as a ‘defined contribution’ scheme. Central government employees contribute 10% of their basic salary, while the government adds 14%. Pensions under the NPS are contingent on the accumulated contributions and investment returns, making the pension amount variable.
7th Pay Commission: All central govt staff except armed forces are covered under NPS
All central government employees, except those in the armed forces, who joined their services after April 2004 are covered under the New Pension System (NPS), following the scrapping of the Old Pension Scheme (OPS) as part of pension reforms implemented 20 years ago. Since then, various central and state government employee unions have been demanding the restoration of the old system. Employees who joined central government services before 2004 remain under the OPS and continue to receive a guaranteed pension.
Will Modi govt restore 50% of last-drawn salary as guaranteed pension
The Centre has previously said many times that reverting to the old pension system is not an option. But reports suggest that the Modi government is trying to find a new solution and considering a guaranteed pension amounting to 50% of the last-drawn salary for central government employees under the NPS.
According to a recent report by The Times of India, the Modi government may take this step in view of payout disparities between the Old Pension Scheme and the New Pension System.
A committee led by Finance Secretary T. V. Somanathan was tasked with examining the demand for a return to the OPS and preparing a report for the government. Under the OPS, central government employees receive a lifelong pension amounting to 50% of their last-drawn salary, with adjustments based on Pay Commission recommendations.
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Why are central government employees demanding OPS restoration?
Central government employees have voiced significant concerns about the NPS, citing several issues. Employee organizations argue that the existence of two pension systems has led to income disparities among retirees from the same organization with equivalent service years, creating a sense of discrimination between different groups of employees working side by side. Additionally, the NPS is criticized for reducing take-home salaries by 10%, further fueling discontent.
To pressure the government into addressing these concerns, various groups associated with central government employees have called for the restoration of the OPS. Recently, the All India Railwaymen’s Federation (AIRF) has formally requested the government to reinstate the OPS.