Explained: Differences Between Unified, New And Old Pension Schemes

The Union government has introduced the Unified Pension Scheme (UPS) amid opposition from several non-BJP-ruled states over the New Pension Scheme (NPS).

Union Information and Broadcasting Minister Ashwini Vaishnaw announced that the UPS will benefit 23 lakh central government employees under the NPS. The scheme will come into effect from April 1, 2025, and employees can choose between NPS and UPS.

The UPS, approved by the Union Cabinet chaired by Prime Minister Narendra Modi, aims to provide assured pension, family pension, and assured minimum pension to government employees. 

Difference between UPS, NPS and OPS

Unified Pension Scheme

With the UPS, employees who have served for a minimum of 25 years will receive an assured pension amounting to 50% of their average basic pay over the last 12 months prior to retirement. For those with less than 25 years of service, the pension will be proportionate to their tenure, with a minimum qualifying service period set at 10 years.

New Pension Scheme

The New Pension Scheme (NPS) is a voluntary, defined contribution retirement savings scheme designed for Indian citizens. It was introduced in 2004 for government employees and later extended to the private sector.

NPS is a portable scheme, meaning subscribers can continue their account even if they change jobs or move locations. It's regulated by the Pension Fund Regulatory and Development Authority (PFRDA) and offers tax benefits under Section 80C and Section 80CCD of the Income Tax Act. 

Old Pension Scheme

The Old Pension Scheme (OPS) is a defined benefit pension scheme that was the traditional pension scheme for government employees in India until 2004. It provided a guaranteed pension amount (50%) based on the employee's last drawn salary and years of service. One of the key features of OPS is that employees do not contribute to the scheme, and the pension amount is entirely funded by the government.