Consider being in the situation of clocking out after giving the best years of your life to your organization, only to find that the returns from your retirement investment would be determined by the market’s uncertainty. The Old Pension Scheme (OPS) in 2004 turned out to be the worst nightmare for millions of Indian government employees when the National Pension System (NPS) replaced it. However, rumors of the OPS return in the year 2025 have grown stronger, now being supported by discontent among the employees and changes in policies.
The Resurgence Wave Sweeping States
There were already some states that were taking steps to go backward with respect to the NPS. Rajasthan, Chhattisgarh, and Jharkhand, in particular, were the first to restore OPS for 2022-2023, and they even extended it to new recruits. Himachal Pradesh and Punjab soon after mid-2025 indicated a similar decision citing fiscal sustainability amid workers’ protests. These decisions guarantee a pension of 50% of the last drawn salary, linked to the inflation rate through Dearness Allowance (DA). A nationwide offshoot of this action was the urging of the National Council (Staff Side) of the Joint Consultative Machinery to Prime Minister Modi for the revival of OPS for 26 lakh central employees under the next 8th Pay Commission in November as the situation was at its peak.
Enter The Unified Pension Scheme
The Unified Pension Scheme (UPS) launched in August 2024 and effective from April 1, 2025 will be a compromise hybrid. It combines the guarantees of OPS with the contributions of NPS, and it allows 50% of average basic pay over the last 12 months as a pension for employees with 25+years of service. A safety net of a minimum Rs 10,000 monthly for 10-year veterans is also in place, and family pensions are set at 60% in the event of the member’s death. By July 2025, the number of central employees who opted in before the September 30 cutoff was over 31,000. The Economic Survey 2025 views this as a step towards inclusive coverage, considering that India’s pension assets are only 17% of GDP.
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| Scheme | Key Feature | Contribution | Pension Guarantee | Inflation Adjustment |
|---|---|---|---|---|
| OPS | Pre-2004 legacy | None from employee | 50% last salary | Full DA linkage |
| NPS | Market-linked | 10% employee, 14% govt | Variable returns | None automatic |
| UPS | 2025 hybrid | 10% employee, 18.5% govt | 50% avg last pay | DA-indexed |
Fiscal Tightrope
If the OPS is reinstated all over India, the Government will have to take care of liabilities that may reach Rs 2.3 lakh crore per year by 2030, according to estimates for 2025. The state of Punjab is among the ones that will have to borrow more; still, the workers’ unions are complaining about the NPS’s lack of stability—average returns in 2025 were only 9-10% which is less than inflation. The 7th Pay Commission’s recent 3% DA increase in December provides temporary relief but brings to the fore the pension puzzle. For unorganized workers, the schemes like Indira Gandhi National Old Age Pension (Rs 200-500 month-to-month) are very unfair compared to the organized sector pensions.
Voices From The Vanguard
- Employee unions: “OPS is not a luxury; it is a right that has been earned through struggle.”
- Economists: “Sustainability necessitates modifications, not the total overturning.”
- Retirees: “NPS was a thief of our peace; UPS is a superficial fix, OPS is the remedy.”
The deliberation on OPS continues as the year 2025 approaches its end. Will the 8th Pay Commission be the deciding factor? For now, it is a ray of hope amidst the confusion about the future of retirement benefits, reminding us that financial security should not be a matter of chance.
