In India, pension schemes for government employees have evolved over the years, with various programs offering different benefits and structures. Three major pension schemes—the
Old Pension Scheme (OPS), the National Pension System (NPS), and the proposed Universal Pension Scheme (UPS)
—offer distinct advantages and features.
This article will break down the key differences and features of these schemes, comparing their contributions, pension calculations, market risks, and eligibility criteria. By understanding how each scheme works, you can better navigate the complexities of pension options available to central government employees and citizens in India.
| SL | PARTICULARS | UPS (Universal Pension Scheme) | NPS (National Pension Scheme) | OPS (Old Pension Scheme) |
| 1 | Introduction & Scheme Suitability | Aimed at providing pension benefits to all citizens, but not widely adopted as OPS or NPS. | Introduced in 2004, defined contribution scheme. More suitable as contributions directly fund individual accounts. | Introduced before 2004, based on defined benefits. Funded by Government, but sustainability under question due to budgetary constraints. |
| 2 | Pension Type: Minimum Pension | Rs.10000/- per month.
Mininum Service: 10 Years |
Depends on the investments made in NPS tier-1 Scheme | Defined benefit of Rs.9000/- per month + allowances
Minimum Service: 10 Years |
| 3 | Gratuity | Eligible | Eligible | Eligible |
| 4 | Family Pension (In Case death of Employee) | 60% of the pension | Depends on accumulated Corpus and chosen annuity Plan | 30% of the basic pay subject to minimum of Rs.9000 per month |
| 5 | Employer’s Contribution | 18.5 % of basic pay + D.A | 14% of the basic pay+ DA | Funded entirely by government |
| 6 | Employee’s Contribution | 10% of basic pay + D.A | 10% of basic pay + D.A | Funded entirely by government |
| 7 | Lumpsum Amount Payment/ Commutation of pension | A lumpsum amount which is 1/10th of thier last pay drawn monthly pay for every six months of completed service | Upto 60% of NPS corpus can be withdrawn lumpsum upon superannuation | Could be taken not exceeding 40% through commutation of pension. Full pension restores on completion of 15 years(75th year). In case of death pensioner commuted portion will not be recovered. |
| 8 | Inflation protection | Pension will be adjusted based on the All – India COnsumer Price Index for Industrial Workers (AICPI-IW). Proposed DA may start from zero on 01.04.2025 | No such proposal | Pension will revised twice a year. i.e on 1st of January and 1st of july, by increasing the Dearness Relief(DR) |
| 9 | Additional Pension/Family Pension | NIL | NIL | Pension goes up by
|
| 10 | VRS on completion of qualifying service | If taken VRS after completion of 25 years of service, he will be eligible to receive his pension only at superannuation age. | 80% of corpus will be kept for annuity fund | will get all eligible settlement at the time of VRS after completing 20 years of service |
| 11 | Risk Factor/ Market Linkage | Risk-free as it provides assured income of Rs.10000/- | High Risk and High reward (depends on performance of the market linked funds in equity, bonds e.t.c) | Risk free & Classic assurance pension |
| 12 | Tax for contribution towards pension scheme | May follow the system followed for NPS | 10% contribution by employee is taxable. Eligible for tax benefit for combined limit of Rs.1.5 lakh under 80C, 80CCC and 80CCD(1) | Nil |
| 13 | Annuity Options | Likely to offer some from annuity or lump sum payout. | At retirement official should purchase an annuity, which provides guaranteed income. | Not applicable under OPS. Pension is directly provided by government |
| 14 | Withdrawal | Conditions for withdrawal will depend on its final design. | Partial withdrawal allowed under certain conditions; lump sum or annuity at retirement. | No option for withdrawal before retirement; only pension. |
In summary, the Old Pension Scheme (OPS) offers a fixed pension based on salary and service, while the National Pension System (NPS) provides a flexible, market-linked option. The Universal Pension Scheme (UPS), still under development, aims to extend pension coverage to all citizens, including those in the informal sector.
Each scheme has its benefits, and the choice depends on individual circumstances and retirement goals. Staying informed about these options is essential for making the best decision for your future.