Why Employees Favor Old Pension Scheme Over NPS Amid Government Clarification
Employee unions urge for the reinstatement of the Old Pension Scheme (OPS) over the National Pension System (NPS), citing its lower exposure to market risks. The central government has clarified that it holds control over pension policies, though some states choose to revert to the older scheme due to pressure from employee unions.
Highlights
- •6.9 million pensioners still rely on the Old Pension Scheme (OPS).
- •Fewer than 50 thousand employees are covered under the National Pension System (NPS)
- •States in Rajasthan, Chhattisgarh, Himachal Pradesh, Punjab, and Jharkhand have opted for the old scheme out of unions’ pressure.
- •The main difference between ONSP and NPS is defined-benefit system versus defined-contribution system.
Employee unions across the country have been advocating for the restoration of the Old Pension Scheme (OPS) over the National Pension System (NPS). The latter has come under scrutiny due to market risks.
The central government, recently reiterating its stance at the Rajya Sabha, highlighted that approximately 6.9 million pensioners are still receiving benefits through the OPS.
According to minister of state for finance Pankaj Chaudhary, there are around 50.14 lakh employees currently under the central government’s domain, with nearly half reliant on the OPS system. In contrast, roughly 49,802 pensioners benefit from the NPS.
The difference lies in the eligibility criteria: those who joined the government service before January 1, 2004, fall under the OPS framework whereas those starting after that date are covered by the NPS. Notably, there have been no reported delays in pension payments under the NPS for the past three years.
The central government emphasizes they have full autonomy over pension policies within their jurisdiction; however, concerns about long-term financial liabilities persist due to cautious warnings from the Comptroller and Auditor General (CAG). Despite these criticisms, a few states such as Rajasthan, Chhattisgarh, Himachal Pradesh, Punjab, and Jharkhand have chosen to revert back to the older scheme in light of intense union pressure.
Understanding the nuances between the Old Pension Scheme, National Pension System (NPS), and Unified Pension Scheme (UPS) is crucial. The OPS was a defined-benefit system where employees were paid based on their last salary plus dearness allowance. In stark contrast, the NPS utilizes a defined-contribution method with both employee and government contributions to market-linked funds. Recently introduced by the government, the UPS aims at offering predictable pensions while maintaining a contributory framework.
