Central government employees covered under the National Pension System (NPS) have been demanding for over two decades from the Centre to restore the Old Pension Scheme (OPS), which replaced the NPS in 2004. The Centre from time to time has made it clear to employee unions that the OPS will not be brought back. The government was once again asked questions around the OPS restoration in Parliament in the Monsoon Session.

Finance Ministry’s clear answer – no proposal to restore OPS

In response to a question asked in the Lok Sabha, Finance Minister Nirmala Sitharaman clarified that at present no proposal to restore OPS is under consideration with the government.

She said that the government distanced itself from OPS because it put an unbearable burden on the treasury. In its place, the National Pension System (NPS) was implemented from 2004, which is a defined-contribution-based scheme.

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She further said that “with a view of improving upon the pensionary benefits for such employees, a committee was constituted under the chairpersonship of the then Finance Secretary to suggest measures to modify the NPS. Based on the deliberations of the Committee with stakeholders, Unified Pension Scheme (UPS) has been introduced as an option under NPS with the objective of providing defined benefits after retirement to the Central Government employees covered under the NPS”.

At present, around 85 lakh central and state government employees are covered under the NPS. All central government departments and autonomous bodies governed by the Centre were brought under the NPS. Only armed forces have been kept out of the NPS purview. In view of the demand for restoration of OPS, the Centre in April this year launched a new pension scheme called Unified Pension Scheme, which guarantees a fixed pension to employees post retirement.

Out of 23 lakh central government employees who are eligible for UPS, only 1.35% i.e. about 30,989 employees have opted for UPS so far. This tepid response forced the Centre to extend the deadline for employees to join UPS by 3 months to 30 September 2025.

OPS, NPS and UPS – Difference between the three

OPS (Old Pension Scheme) – In this, 50% of the last salary was given as pension on retirement, no monthly contribution was taken from the employee.

NPS (National Pension System) – Implemented since 2004, both the employee and the government contribute to it, the pension amount depends on market returns.

UPS (Unified Pension Scheme) – New option under NPS, in which the employee contributes 10% and the government contributes 18.5%, 50% pension of the salary is assured on 25 years of service.

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Why are employees unhappy?

First of all, the employees’ anger regarding NPS was about its uncertain pension amount and dependence on market-based returns. After the arrival of UPS, it was expected that the dissatisfaction would reduce, but many employees do not see financial security like OPS in it.

There is also dissatisfaction about the long service period, monthly contribution and limited definition of family to get pension in UPS.

Why was the participation low?

Waiting in hope for the restoration of OPS – Many employees believe that by continuing the agitation, OPS can be brought back.

Skepticism towards UPS – It is not considered a complete alternative to OPS.

Fear of losing some benefits of NPS – Reluctance to give up the flexibility and tax benefits of NPS.

What next?

Even though UPS is being described as a balanced mix of OPS and NPS, the limited trust and low participation of employees is a sign for the government that there is still a long way to go in pension reforms. The government’s stand on the restoration of OPS is clear at the moment – it is not possible. But the success of UPS will depend on how the government addresses the concerns of employees in the coming months.