What is Old Pension Scheme (OPS)? Why Government Employees Against NPS?

OPS vs NPS: Employees of many state governments including central employees are demanding re-implementation of the old pension scheme (OPS). Now the employees of the Uttar Pradesh government are not happy with the implementation of the National Pension Scheme (NPS).

They demand that the Old Pension Scheme (OPS) should be re-implemented. Since September 2023, government employees of different states across the country have been protesting for their demands. Last week, demonstrations were held by government employees outside many offices in Assam.

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What is Old Pension Scheme? Why Government Employees Against NPS?
What is Old Pension Scheme? Why Government Employees Against NPS?

Last year in November, thousands of employees and pensioners of central and state governments gathered at Ramlila Maidan in Delhi. These people demanded the central government immediately bring back the Old Pension Scheme (OPS). This was the fourth demonstration in the capital on the issue of the re-implementation of the old pension scheme.

On the other hand, many railway employee organizations have also warned that if the demand for implementation of the Old Pension Scheme (OPS) is not accepted, then they will stop train services across the country from May 1.

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What is the Old Pension Scheme (OPS)?

The Old Pension Scheme (OPS) was started in the 1950s. Under the scheme, after retirement, the employee gets 50% of the last basic salary received as pension every month. Apart from this, Dearness Allowance (DA) was also available on retirement or the average of the income of the last 10 months, whichever is higher.

Old Pension Scheme (OPS)
Old Pension Scheme (OPS)

To avail of this benefit, it was necessary to complete at least 10 years of government service. In this scheme, employees did not have to deposit any kind of money and there was no tax on the pension received. OPS was stopped by the government in the year 2003. However, it was implemented from 1 April 2004.

What is New Pension System (NPS)?

In the New Pension System (NPS), state government employees deposit 10% of their basic salary and dearness allowance. Apart from this, 14% of money is deposited by the government. This money is invested in one of the funds approved by the Pension Fund Regulatory and Development Authority (PFRDA).

New Pension System (NPS)
New Pension System (NPS)

The returns of this fund are linked to the stock market, so it is not certain how much money you will get. After retirement, 60% of the corpus is tax-free, while the remaining 40% is taxable when invested in an annuity.

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Why are Government Employees Against NPS?

According to the organizations demanding restoration of the Old Pension Scheme (OPS), those doing government jobs after January 2004 are worried about life after retirement. He says that under the New Pension Scheme (NPS), it is not right to deduct 10% from the salary every month.

In NPS, the employee gives 10% of the money for the pension fund and the government gives 14% of the money. Employees also argue that the government does not have records of the correct number of employees, hence many times money is not deposited in the government employees’ fund. The pension received after retirement depends on this fund. Dearness Allowance (DR) is not available in NPS.

Old Pension Scheme was Reinstated in these States:

Some states like Rajasthan, Chhattisgarh, Jharkhand, Punjab and Himachal Pradesh have announced to bring it back. West Bengal never implemented NPS. The pension received every month provides a sure source of income throughout life after retirement.

The biggest advantage of the old pension scheme is that no money is deducted from the salaries of the employees, which reduces the burden on their financial condition. Besides, there is no tax of any kind on the pension received after retirement. If the employees themselves wish, they can also deposit more money to increase their pension amount.

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OPS vs NPS: Which is more Beneficial?

OPS vs NPS
OPS vs NPS

If we talk in simple words then OPS increases the burden on the government exchequer. But NPS affects the take-home salary of government employees. This is the reason why some states want to reinstate OPS to attract government employees. Both OPS and NPS have their own benefits.

Only government employees get the benefit of the Old Pension Scheme, but everyone can get the benefit of the New Pension SchemePrivate sector employees can also avail financial help after retirement by investing in NPS. Besides, tax exemption is also available in NPS.

Minister of State for Finance Pankaj Chaudhary had recently said in a written reply in the Lok Sabha that till March 31, 2023, the total number of Central Government pensioners is around 68 lakh. Defence pensioners are also included in this.

The government’s argument for not reinstating the Old Pension Scheme (OPS) is that as pension payments increase, states will have to provide more funds for pensions, which will increase capital expenditure and leave less money for other development works.