No Plan to Restore Old Pension Scheme: Nirmala Sitharaman
- No proposal to restore the old pension scheme for central government employees under NPS
- Unified Pension Scheme introduced to provide defined retirement benefits.
- Employees opting for UPS will be eligible for additional benefits in case of death, invalidation or disablement.
Nirmala Sitharaman informed Parliament that the government has no plans to bring back the Old Pension Scheme (OPS) for central government employees who are covered under the National Pension System (NPS). She said that NPS, a defined contribution scheme, will continue for those who joined government service after January 1, 2004.
The OPS was discontinued for new recruits into government service more than two decades ago. In its place, NPS was introduced as a more sustainable pension scheme. However, there has been ongoing demand from employee unions and some state governments for the restoration of OPS, arguing that the NPS offers lesser retirement security. In response, the government has opted to introduce a new option Unified Pension Scheme (UPS) for NPS covered employees.
To improve the pension benefits for NPS members, the government formed a committee, led by the former Finance Secretary, to explore ways to enhance the existing pension system. After consultations with stakeholders, the UPS was introduced as an additional option within NPS. The aim is to provide a defined benefit at retirement while maintaining fiscal responsibility.
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Under the new scheme (UPS) employees who have completed at least 25 years of qualifying service will receive a guaranteed pension of 50% of the average basic pay from the last twelve months of their service. If an employee has served for less than 25 years, the payout will be proportionally reduced. This ensures that the pension remains fair, even for those with shorter service periods, while also keeping the system financially sustainable.
The scheme also offers additional benefits. Employees who choose UPS will be eligible for benefits under the CCS (Extraordinary Pension) Rules, 2023. This means that in cases of death, invalidation, or disability during service, employees or their families will receive pensions or financial support under these rules. These provisions ensure that employees are supported not only in their retirement years but also in case of unforeseen circumstances during their service.
The government notified the introduction of UPS on January 24, 2025, allowing employees covered under NPS to opt for this new pension option.The decision to implement UPS comes as part of the government's effort to improve the retirement benefits for central government employees while maintaining fiscal management.
By introducing a defined benefit structure under NPS, the government aims to provide more security to employees post-retirement without the financial burden associated with the Old Pension Scheme
