Government employees waiting for a return of the Old Pension Scheme (OPS) have received an important update.
The Centre has made it clear that there is currently no plan to restore OPS for Central Government employees covered under the National Pension System (NPS).
In a written reply in the Lok Sabha, Minister of State for Finance Pankaj Chaudhary said the government had moved away from OPS because of the financial burden it could create for the government.
Instead of bringing back OPS, the Centre has pointed to the Unified Pension Scheme (UPS), which became effective from April 1, 2025.
Why Is the Government Against Bringing Back OPS?
The government’s main concern is the long-term financial burden of OPS.
Under OPS, employees receive a defined pension after retirement, with the government responsible for funding the pension payments.
The Centre has argued that this creates an unsustainable fiscal liability for the government over the long term.
The government has also highlighted concerns raised by the Comptroller and Auditor General (CAG) about the financial impact of states returning to OPS.
However, the decision is different for state government employees.
States can decide whether to restore OPS for their own employees, based on their policies and financial situation.
OPS vs NPS: What Is the Difference?
The biggest difference between OPS and NPS is how the retirement benefit is calculated.
Under OPS, the pension is a defined benefit. It is linked to factors such as salary and qualifying service, while the government bears the financial responsibility.
Under NPS, both the employee and government contribute to a pension account.
The money is invested, and the retirement benefit depends on the accumulated corpus, investment returns and the payout or annuity option.
The Centre introduced NPS for new Central Government employees, except the armed forces, joining service from January 1, 2004.
This system was introduced with the aim of making the pension system more financially sustainable.
Why Are Employees Demanding OPS?
A major concern among employees under NPS is that it does not guarantee a fixed pension based on their final salary.
The final retirement income depends on the amount accumulated in the pension account, investment performance and the payout structure.
Employee organisations have raised concerns about market risks and the uncertainty surrounding the final pension amount.
This is one of the major reasons why some employees continue to demand the restoration of OPS.
What Is the Unified Pension Scheme?
The government introduced UPS from April 1, 2025 as an option under the NPS framework.
The scheme was designed to provide employees with greater certainty about their retirement income.
An employee with at least 25 years of qualifying service can receive an assured payout equal to 50% of the average basic pay earned during the last 12 months before retirement, subject to the applicable conditions.
For employees with 10 to 25 years of qualifying service, the payout is proportionate to their service.
UPS also provides a minimum assured payout of ₹10,000 per month for eligible employees who complete at least 10 years of qualifying service.
The scheme also provides Dearness Relief, helping the assured payout remain linked to inflation.
UPS Is Not the Same as OPS
Although UPS provides an assured payout, it is important to understand that UPS and OPS are not the same.
OPS is a defined-benefit pension system funded by the government.
UPS, on the other hand, continues to have a contributory and fund-based structure. Both the employee and government make contributions under the scheme.
This is why the government describes UPS as a middle path between the traditional pension system and NPS.
It aims to provide greater certainty over retirement income while retaining the contributory structure.
How Much Pension Can Employees Get Under UPS?
For an employee completing at least 25 years of qualifying service, the assured payout is based on 50% of the average basic pay during the final 12 months before retirement.
For example, if the average basic pay during those 12 months is ₹80,000, the basic assured payout under the formula would be ₹40,000 per month, subject to the scheme’s conditions.
Employees with 10 to 25 years of qualifying service receive a proportionate benefit.
UPS also provides a family payout.
Under the applicable rules, the legally wedded spouse can receive 60% of the employee’s assured payout after the employee’s death.
UPS Also Offers a Lump-Sum Benefit
The benefits under UPS are not limited to the monthly pension.
Employees are also eligible for a lump-sum payment at retirement, in addition to gratuity.
The amount is calculated based on monthly emoluments, including basic pay and Dearness Allowance, for every completed six months of qualifying service.
According to the government’s description of the scheme, this lump-sum payment does not reduce the assured pension.
What Is the Latest Status of OPS and UPS?
For now, the Centre’s position is clear: there is no move to restore OPS for Central Government employees covered under NPS.
The government is instead promoting UPS as an option designed to address concerns over pension uncertainty.
The latest government data also shows the scale of the existing pension system.
The NPS assets under management for Central Government employees stood at ₹3.65 lakh crore as of July 26, 2026.
At the broader level, total NPS assets under management were around ₹15.95 lakh crore as of March 31, 2026, covering the wider NPS ecosystem.
OPS vs NPS vs UPS: Understand the Difference
In simple terms:
OPS: Provides a defined pension funded by the government.
NPS: Builds a retirement corpus through employee and government contributions, with the final benefit depending on the accumulated corpus and applicable payout rules.
UPS: Retains the contributory structure but offers an assured and inflation-linked payout, subject to the scheme’s conditions.
For now, the Centre is choosing UPS over a return to OPS.
The government says this approach can provide greater retirement security to employees without taking on the potentially heavy long-term financial burden associated with the old pension system.
