No Proposal to Restore Old Pension Scheme: Finance Minister Clarifies in Lok Sabha

The Union Government has ruled out the possibility of restoring the Old Pension Scheme (OPS) for Central Government employees covered under the National Pension System (NPS), citing unsustainable fiscal liability as the primary reason.

Responding to a Starred Question No. 308 in the Lok Sabha, Finance Minister Nirmala Sitharaman stated that the Government had moved away from OPS due to the heavy and unsustainable burden it posed on the exchequer.

Why OPS Won’t Be Restored

• OPS, being a defined benefit scheme, created long-term unfunded liabilities.
• NPS, introduced from January 1, 2004 (except for armed forces), is a defined contribution scheme aimed at ensuring fiscal discipline while providing post-retirement income.
• A committee chaired by the then Finance Secretary was tasked with suggesting modifications to NPS to improve pensionary benefits.

Introduction of the Unified Pension Scheme (UPS)

• Based on stakeholder consultations, the Unified Pension Scheme (UPS) was introduced on January 24, 2025 as an option under NPS.
• UPS aims to provide defined benefits after retirement, with payouts designed to be fiscally sustainable.
• The definition of family under UPS has been framed to ensure the financial stability of the scheme.
• In case of death during service or discharge due to invalidation or disablement, employees opting for UPS can avail benefits under CCS (Pension) Rules, 2021 or CCS (Extraordinary Pension) Rules, 2023.

Key Features of UPS

• Assured payout on retirement: 50% of the average basic pay of the last 12 months before retirement.
• Minimum qualifying service: 25 years; proportionate payout for shorter service.
• Introduced through official notification, not merely a press release.

The Minister’s reply also addressed concerns about the exclusion of unemployed sons, unmarried/widowed/divorced daughters, and dependent parents from the definition of family under UPS, noting that the design balances benefit assurance with fiscal sustainability.

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