Will India govt restore Old Pension Scheme? Centre says no proposal under consideration: Here's why
Will Prime Minister Narendra Modi-led India government restore the Old Pension Scheme (OPS)? MP Indra Hang Subba has asked, to which, Minister of State for
Will Prime Minister Narendra Modi-led India government restore the Old Pension Scheme (OPS)? MP Indra Hang Subba has asked, to which, Minister of State for Finance Pankaj Chaudhary has replied in the Lok Sabha on Monday (10 August). The MoS has stated that Government has no proposal under consideration to restore the Old Pension Scheme due to its unsustainable fiscal liability on the Government exchequer. Chaudhary further noted that state governments of Rajasthan, Chhattisgarh, Jharkhand, Punjab and Himachal Pradesh have informed the Centre and the Pension Fund Regulatory and Development Authority (PFRDA) about reversion from Pension System (NPS) to OPS, he said in a written reply in the Lok Sabha. Also Read | Old Pension Scheme: Centre allows select employees to opt for OPS "There is no provision under PFRDA Act, 2013, read along with PFRDA (Exits and Withdrawals under the Pension System) Regulations, 2015, and other relevant Regulations, vide which the accumulated corpus of the subscribers viz Government contribution, Employees' contribution towards NPS along with accruals, can be refunded and deposited back to the State Government," he said. Why Centre is not restoring Old Pension Scheme The Finance Ministry's position centres on the long-term fiscal liability associated with OPS.
Unlike the Pension System (NPS), which is a defined contribution-based scheme, OPS provides a defined benefit to eligible government employees. Chaudhary said the government had considered ways to improve pension benefits for Central Government employees covered under NPS. A committee headed by the then Finance Secretary was constituted to examine possible changes after consultations with stakeholders. The government subsequently introduced the Unified Pension Scheme (UPS) as an option under NPS from April 1, 2025. OPS vs NPS: What is the difference? The NPS was introduced for Central Government employees, excluding the armed forces, who joined service on or after January 1, 2004. It operates on a defined contribution model, with contributions from employees and the government invested to build a retirement corpus. OPS, in contrast, provides a defined pension after retirement and does not operate on the same fund-based contribution structure. Also Read | The Old Pension Scheme is fiscally risky but there's a case for it too The government has argued that returning to OPS would create a significant and potentially unsustainable liability for public finances. Chaudhary also pointed to recent State Finance Audit Reports from the Comptroller and Auditor General (CAG), which have highlighted the fiscal implications of States reverting to the old pension system.
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