No plan to restore OPS due to its 'unsustainable fiscal liability', says FM

Finance Minister Nirmala Sitharaman said the features of Unified Pension Scheme have been designed to ensure payment of assured payouts while also maintaining the fiscal sustainability of the fund

There is no proposal under consideration for the restoration of the Old Pension Scheme (OPS) in respect of central government employees covered under the National Pension System (NPS), Finance Minister Nirmala Sitharaman informed the Lok Sabha on Monday.

 

She said, the Centre had moved away from OPS “due to its unsustainable fiscal liability on the government exchequer”.

 

The minister added that to improve pensionary benefits for employees under NPS (introduced in 2004), a committee under the then Finance Secretary was set up to suggest modifications. “Based on the deliberations of the Committee with stakeholders, Unified Pension Scheme [UPS] has been introduced as an option under NPS with the objective of providing defined benefits after retirement to the Central Government employees covered under the NPS,” she said.

 

“The features of UPS, including the definition of family, have been designed in such a way so as to ensure payment of assured payouts while also maintaining fiscal sustainability of the fund,” she emphasised.

Employees opting for UPS under NPS would also be eligible to avail benefits under the CCS (Pension) Rules, 2021, or the CCS (Extraordinary Pension) Rules, 2023, in the event of death during service or discharge on grounds of invalidation or disablement, the finance minister said.

 

Difference between OPS, NPS, and UPS 

The OPS offered a government-funded, defined benefit equal to 50 per cent of the last drawn basic salary, with no employee contribution and inflation-linked adjustments. In 2004, it was replaced by the NPS, a defined contribution plan where employees pay 10 per cent of salary and the government 14 per cent, with payouts depending on market returns.

 

The UPS, implemented from April 2025, combines elements of both, providing a fixed pension benefit alongside a contributory component. It is fully funded and designed to be fiscally sustainable while avoiding future liabilities.

 

For a detailed comparison between the three, click here.