08 Mar, 2024 01:49 PM

 Pension Scheme Gains Traction Across States, Despite Central Hurdles

 Pension Scheme Gains Traction Across States, Despite Central Hurdles

The Old Pension Scheme (OPS) is coming back across several Indian states, with Rajasthan, Chhattisgarh, Jharkhand, Punjab, and Himachal Pradesh already reintroducing it. Karnataka and Telangana are likely to follow suit. This resurgence raises questions about the future of the National Pension Scheme (NPS) and the financial implications for the government.

Why the Shift from NPS to OPS?

Employees largely disfavour the NPS. Under OPS, they received a fixed pension, typically half their last drawn salary, without contributing towards a pension fund. The NPS, on the other hand, requires employee contributions (10% of basic salary and Dearness Allowance) with a matching contribution from the employer (14%). Upon retirement, employees receive 60% of the accumulated corpus and invest the remaining 40% in annuities.

For employees, the NPS offers less guaranteed income and is seen as market-dependent. The OPS provides a more secure and predictable retirement income.

Arguments for and Against OPS

Arguments for OPS:

  • Guaranteed Pension: Employees receive a fixed monthly income after retirement.
  • Social Security: Provides financial security in old age.
  • Boosts Demand: Regular pension payments stimulate the economy.

Arguments Against OPS:

  • Financial Burden: The government bears the entire pension cost, which can strain the exchequer.
  • Unsustainable Model: The pay-as-you-go system might not be viable in the long run, especially with rising life expectancy.
  • Limited Reach: Only government employees benefit, excluding the vast private sector workforce.

The Road Ahead

The central government's resistance to OPS highlights concerns about its long-term fiscal impact. However, employee unions are pressuring for its return, and state governments are increasingly receptive.

Finding a middle ground is crucial. The government could explore a hybrid model, combining elements of both OPS and NPS. Additionally, focusing on economic growth to generate revenue for future pension obligations is essential.


The OPS debate highlights the need for a sustainable and inclusive pension system. While OPS offers security to government employees, its financial implications require careful consideration. A long-term solution needs to balance employee well-being with fiscal responsibility, ensuring a dignified retirement for all

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