The issue of the Old Pension Scheme (OPS) came back to the limelight in the year 2025 particularly through queries raised in the House of Parliament and new explanations given by the Finance Ministry. A longstanding demand by many government employees is a move back to OPS, under which there will be a definite pension received on retirement. So what are the new updates all about and what do they mean to you? Here is a brief rundown.
What Is the Old Pension Scheme?
Before 2004 the use of the Old Pension Scheme was made. Retired government employees under this system drew a fixed monthly pension, mostly amounting to 50 percent of his/her previous salary drawn, Dearness Allowance (DA). Pension fund did not require employees to make contributions- it was entirely financed by the government. This made life financially secure to retirees.
In 2004, the government has substituted OPS with the National Pension System (NPS) that is linked with the market and involves contributions to both employee and government. As opposed to the OPS, the benefits of a pension under NPS are subject to the performance of the bank and savings.
What Changed in 2025?
The Finance Ministry in August 2025, clarified that OPS is not going to be reinstated to the central government employees who have entered NPS2. Yet, some key updates have to be noted:
In 2023, some central Government employees were permitted a one-time option to revert to OPS. This was only to those that were selected to the job prior to December 31, 2003, and entered the service afterward on or after January 1, 2004.
The employees of the Public Sector Undertakings (PSUs) and Public Sector Banks such as SBI cannot avail OPS even when they are joined after the cutoff dates.
In April 2025, a new alternative referred to as the Unified Pension Scheme (UPS) was provided by the government. This is a subset of NPS and provides guarantee pension benefits- up to 50 percent of the average salary after 25 of service.
Why Is OPS Not Coming Back?
The government asserts that OPS imposes loss of a lot of finances on the treasury and is not long term sustainable3. The NPS is a more future-proof system because it is a contribution base and hence more balanced. That is why the government is busy trying to better NPS using incentives such as UPS rather than to revive OPS.
Final Thoughts
Whereas most of the employees were keen that old pension scheme be reinstated, the government has shown that to many they are not likely to have OPS. The Unified Pension Scheme is however offering a compromise between the two extremes- providing certain degree of adequate pension and ensuring metabolic balance in the system.
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