UPS: Understanding the fiscal implications of govt's new pension scheme

The UPS is seen to be different from OPS since it is funded every year and the burden does not fall on future governments.

The Centre and states together spent about Rs 9.6 trillion on the pension of their employees in 2023-24 (FY24, revised estimates), accounting for 3.3 per cent of India’s gross domestic product (GDP). The proportion peaked at 3.8 per cent in the pandemic year of FY21 and fell to 3.3-3.4 per cent later. The average spending was 3.3 per cent in the decade beginning FY15. 

Most of the burden was caused by the old pension system (OPS). Under the new pension system (NPS), effective for employees recruited from January 1, 2004 in central services, excluding the army, and