OPS vs NPS: Which scheme is best for you? Why is the demand for restoring the OPS being raised in the context of the 8th Pay Commission?00

The Old Pension Scheme (OPS) is a topic generating significant discussion regarding the upcoming 8th Pay Commission. Employee unions are demanding the restoration of the OPS alongside salary and pension hikes in the 8th Pay Commission. Dr. Manjeet Singh Patel, National President of the All India NPS Employees Federation, believes that the old system offers genuine security for employees in their old age. However, the government argues that the OPS places a heavy financial burden on the economy, which is why it tends to avoid discussing the matter extensively.

With the debate over OPS restoration gaining momentum in the context of the 8th Pay Commission, it is crucial to understand the differences between the NPS and the OPS and determine which is more beneficial for employees. Dr. Manjeet Patel has openly shared his views on this, explaining which scheme is truly the best fit for employees.

OPS vs. NPS: What is the difference?
What is the NPS and what are its benefits? Dr. Manjeet Singh Patel explained that the NPS (National Pension Scheme) is a corpus-based scheme; the pension amount is determined by the total funds accumulated. Employees contribute 10% of their salary, while the government contributes 14%, resulting in a total monthly contribution of 24%. A long tenure—such as 30 years or more—leads to a substantial corpus and a better pension. Conversely, those with shorter tenures or early retirement may receive a lower pension. This is the primary criticism leveled against the NPS.

What is the OPS and what are its benefits? Under the OPS (Old Pension Scheme), an employee became eligible for a pension after completing 10 years of service. This meant that upon retirement—at any point after those 10 years—a pension amounting to 50% of the last drawn salary was guaranteed, and the employee's contributions deducted towards the General Provident Fund (GPF) were refunded in full, without any deductions. The most significant aspect is that after 20 years of service, an employee could opt for voluntary retirement and receive full benefits, with the pension calculated based on the last drawn salary rather than the accumulated corpus. Consequently, it is considered 'guaranteed' and secure.

The Big Question: Why are employees demanding the restoration of the OPS?
Dr. Manjeet Singh Patel explained that employees are demanding the restoration of the OPS because it offered a clear guarantee regarding the pension. For instance, if an employee's final basic salary was ₹60,000, the OPS ensured a monthly pension of exactly 50% of that amount—₹30,000—regardless of market conditions.

In contrast, the pension under the NPS depends on the size of the corpus accumulated over 20–25 years and the returns generated on it. A shorter tenure of service could result in a lower pension. The UPS also requires a minimum of 25 years of service. It is this uncertainty that leads employees to view the OPS as the more secure option.

Manjeet Patel explained this in simpler terms. He noted that the Old Pension Scheme was a non-contributory system providing a fixed pension based on the employee's final salary, whereas the NPS is a market-linked contributory scheme. Under current government rules, if an employee passes away or becomes disabled during service or shortly before retirement, they have two options:

First Option: The employee (or beneficiary) can withdraw their contribution along with interest and receive a pension amounting to half of the final basic salary plus Dearness Allowance (DA) under the Old Pension Scheme.
Second Option: Withdraw 20 percent of the total corpus and invest the remaining 80 percent in a bank to receive a pension based on NPS norms.

What are the demands regarding the 8th Pay Commission?
Dr. Patel asserts that a pension is not a commercial venture or business; rather, it is a guarantee of social income security for one's old age. While explaining the calculations, Dr. Patel raised the point that it is unfair for an employee who joins service at the age of 18 and completes a long, unblemished career spanning 42 years to ultimately be covered solely by the NPS. In contrast, if someone receives benefits after a much shorter period of service due to an accident or unforeseen event...

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