For more than two decades, central government employees covered under the National Pension System have been calling for a return to the Old Pension Scheme, which guaranteed half of the last drawn salary as pension without requiring any monthly contribution from workers. However, the Finance Ministry has once again confirmed that the Old Pension Scheme is not on the government’s agenda.
Finance Minister Nirmala Sitharaman told Parliament during the Monsoon Session that the Old Pension Scheme placed a heavy financial burden on the exchequer and was replaced in 2004 with the National Pension System, a defined contribution plan where both the employee and the government make monthly payments. While the NPS offers tax benefits and investment flexibility, the final pension payout depends on market performance, which has been a major point of concern for employees seeking guaranteed income after retirement.
To address these concerns, the government introduced the Unified Pension Scheme earlier this year. The UPS is meant to combine the predictability of the Old Pension Scheme with the structure of the NPS. Under UPS, employees contribute ten percent of their salary while the government contributes eighteen and a half percent. The scheme promises fifty percent of the last drawn salary as pension after twenty five years of service. However, participation so far has been underwhelming. Out of twenty three lakh eligible central government employees, only around thirty thousand have opted for UPS.
The low sign-up rate has been attributed to multiple factors. Many employees are still holding out hope for the return of the Old Pension Scheme and do not want to commit to a new system. Others believe UPS does not fully match the security of OPS, pointing to the mandatory long service requirement and a narrower definition of family eligibility. There is also reluctance to give up the flexibility and tax advantages of the existing NPS.
In light of this tepid response, the government has extended the deadline for employees to join the Unified Pension Scheme until the end of September 2025. Officials continue to describe UPS as a balanced approach that blends security and sustainability, but they acknowledge that its success will depend on how employee concerns are addressed in the coming months.
For now, the Centre’s stance is firm a return to the Old Pension Scheme is not financially viable. The government is betting on refining UPS to win employee trust and make pension reform more sustainable in the long run.
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