No proposal under consideration for restoration of Old Pension Scheme: FM Sitharaman 

National Pension System is a defined contribution-based scheme which was introduced for central government employees (except armed forces) joining service on or after January 1, 2004.

Finance Minister Nirmala Sitharaman informed the Parliament on Monday that there is no proposal under consideration of the Government of India for restoration of Old Pension Scheme (OPS) in respect of central government employees covered under National Pension System (NPS).

In a reply in the Lok Sabha, Sitharaman said that the government had moved away from OPS due to its unsustainable fiscal liability on the government exchequer.

What is NPS?

NPS is a defined contribution-based scheme which was introduced for central government employees (except armed forces) joining service on or after January 1, 2004.

With a view to improving upon the pensionary benefits for such employees, a committee was constituted under the chairpersonship of the then Finance Secretary to suggest measures to modify the NPS, she said.

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 as to ensure payment of assured payouts while also maintaining fiscal sustainability of the fund, she said.

Further, she said, the government employees who opt for UPS under NPS would also be eligible for option for availing benefits under the CCS (Pension) Rules, 2021 or the CCS (Extraordinary Pension) Rules, 2023, in the event of death of the government servant during service or his discharge on the ground of invalidation or disablement.

UPS has been introduced through a notification by the government on January 24, 2025, as an option under NPS, she said.

Under UPS, she said, assured payout is admissible on retirement at 50 per cent of the twelve-month average basic pay, immediately prior to retirement after a minimum 25 years of qualifying service.

In case of a lesser qualifying service period, proportionate payout would be admissible, she said.

(With agency inputs)