Decoding OPS Vs NPS Vs UPS: Which Pension Scheme Benefits Employees The Most?

From not contributing anything but getting an assured pension under the Old Pension Scheme, to contributing 10 percent and getting pension dependent on market vagaries under the New Pension Scheme, to now continuing to contribute 10 percent under the Unified Pension Scheme but getting an assured pension — central government employees are now in a new regime for pension

Pension has been a major emotive and financial issue for a government employee, a supplement to the inherent job security. There was, hence, considerable concern over the New Pension Scheme (NPS) that kicked in for those joining the government after 2004 as the pension amount was not assured for them but dependent on how their contributions and those of the government did in the market.

The Narendra Modi-led government has combined the best features of both the OPS and NPS to roll out the Unified Pension Scheme (UPS).

Here’s how the UPS combines the best of OPS and NPS:

• A central government employee will have to contribute 10% under the UPS. This was not the case in the OPS as the Centre bore the entire amount, but this 10% was introduced under the NPS
• There will be an assured pension amount under the UPS like under the OPS. Also, the pension amount will increase as per inflation index like under the OPS. The pension amount is not dependent on market vagaries like in the case of the NPS
• Government contribution under the NPS was 14%. Now, under the UPS, it has been hiked to 18.5%. So, the government is taking on the extra burden
• The main difference in the UPS is that it is both a funded and a contributory scheme, plus offers an assurance on pension amount
• The move will benefit 23 lakh central government employees. If the states take this route as well, a total of 90 lakh employees could benefit, who are currently under the NPS. All BJP-led states will adopt the UPS soon
• Employees have been offered the option to switch to UPS by April 1, 2025, like those who were under the NPS since 2004. Arrears will be paid to them as well.

Eye on Delhi elections

The government has its eye set firmly on the upcoming assembly elections, where the Congress could have promised a return to OPS like it did in Himachal Pradesh and other past state polls.

States like Haryana and Maharashtra go to the polls soon. Delhi, which will also vote early next year, has a big central government employee voter base and the BJP is keen on wooing it after having been out of power in Delhi for 27 years.

The OPS was scrapped by the Atal Bihari Vajpayee-led regime in 2003 and NPS was introduced. The Manmohan Singh-led government continued with it for 10 years of the UPA, and so did the Modi government over the past decade.