'Almost OPS’: Centre's Unified Pension Scheme Offers Big Bonanza For Central Employees Updated: August 25, 2024, 10:12 IST By M.k.karikalsozhan blog Reporter
The New Pension Scheme (NPS), implemented by the Atal Bihari Vajpayee government in 2003, replaced the OPS. Successive governments, including those led by Manmohan Singh and Narendra Modi, continued with the NPS. However, last year, a committee was established to review the mounting requests from various employee unions. Although the Congress made restoring the OPS a focal point in its state election campaigns, it omitted the issue from its 2024 Lok Sabha manifesto.
On Saturday, the Union Cabinet approved the Unified Pension Scheme, describing it as a blend of both OPS and NPS that mitigates market uncertainties and provides greater assurance. Under the UPS, retirees will receive a guaranteed pension amounting to 50% of their basic pay, plus dearness relief adjusted for inflation. Additionally, central government employees who have retired since 2004 will benefit from the UPS, with arrears paid retroactively.
Starting April 1, 2025, employees will have the option to transition to the UPS, which is expected to be an attractive choice due to its incentives. The UPS is anticipated to impact government finances significantly, a concern that led the Vajpayee administration in 2003 to replace the OPS, citing the high pension burden on government finances. The Agnipath scheme, introduced for the armed forces, also aims to reduce the pension burden on the government.
**Political Implications**
The Congress may view this move as another reversal by the Modi government following the 2024 Lok Sabha election results, particularly since many BJP leaders previously argued that reverting to OPS would create a significant fiscal strain. Union Minister Ashwini Vaishnaw pointed out that some Congress experts, such as P. Chidambaram and Montek Singh Ahluwalia, had also not supported a return to OPS, reflecting internal divisions within the party.
Recently, the BJP government has made several adjustments, including rolling back the lateral entry scheme for the bureaucracy in favor of future reservations, sending the Waqf Bill to a Joint Parliamentary Committee under pressure, and withdrawing the controversial Broadcast Bill draft. With upcoming state elections in Haryana, Maharashtra, J&K, Jharkhand, and Delhi next year, the Modi government is making swift policy moves.
Vaishnaw emphasized that the UPS decision was the result of extensive consultations and careful consideration. The government has increased its contribution to the scheme from 10% to 14% under Modi's leadership and now to 18.5%. The UPS will be a contributory funded scheme offering an assured pension indexed to inflation, along with a lump sum payment upon retirement equivalent to 10% of pay plus DA for every six months of service. Additionally, the UPS will provide a family pension of 60% of the pre-demise pension and a minimum assured pension of Rs 10,000 per month after ten years of service.
In a significant policy shift that closely resembles a return to the Old Pension Scheme (OPS) which was in place until 2003, the Narendra Modi government has introduced the Unified Pension Scheme (UPS), addressing a key demand from central employees.