abhi2807 What Is the Old Pension Scheme (OPS)? The Old Pension Scheme (OPS) is a retirement scheme approved by the government. It provides a guaranteed monthly pension to government employees who have completed at least ten years of service. The pension amount is based on the last drawn basic salary and years of service. Under the OPS: The government pays the entire pension amount after retirement. No deductions are made from the employees’ salaries during service. Retired employees receive: A fixed monthly pension. Dearness Allowance (DA) revisions twice a year, which increases their pension accordingly. Applicable only to government employees. What Is the National Pension Scheme (NPS)? Introduced in 2004 by the NDA government to replace the OPS for new recruits. Extended in 2009 to cover all citizens, including self-employed and unorganised workers. The NPS: Is a voluntary, market-linked annuity-based pension scheme. Is regulated by the Pension Fund Regulatory and Development Authority (PFRDA). Contribution under NPS: Government employees: Contribute 10% of basic salary + DA. The government contributes 14% of basic salary + DA. Other citizens: Can contribute a minimum of Rs.500 per month. Funds are invested in a diversified portfolio (government bonds, equities, debentures, etc.) managed by professional fund managers (e.g., SBI, LIC, UTI). Upon retirement: 60% of the corpus can be withdrawn tax-free. 40% is used to purchase annuity plans for monthly pension. Employees Who Can Opt For Old Pension Scheme Employees who joined after 2004 were automatically enrolled in the NPS. In February 2023, the Department of Pension and Pensioner’s Welfare (DoPPW) gave a one-time option to certain Central Government employees to switch to OPS. Conditions to be eligible for OPS: Appointed for a vacant post advertised/notified before 22.12.2003. Joined service on or after 01.01.2004. Currently covered under NPS. Eligible employees had to apply before 31.08.2023. Employees who did not opt by the deadline remain under NPS. Comparison Between OPS and NPS ParticularsOld Pension SchemeNew Pension Scheme Eligible employeesOnly government employeesGovernment employees, individual citizens between 18–60 years, and NRIs Pension payment basisBased on last drawn salary + DABased on investments made in the NPS during employment Pension amount50% of last drawn salary + DA or average of last 10 months’ salary, whichever is more60% lump sum post-retirement; 40% invested in annuity for monthly pension Contribution amountNo contribution from employeesGovernment employees: 10% of salary; Government: 14% contribution Income tax benefitsNo tax benefitsDeductions up to ₹1.5 lakh under Section 80C and ₹50,000 under Section 80CCD (1B) Tax on pension amountPension is tax-free60% of corpus is tax-free; 40% used for annuity is taxable Final Verdict ScenarioBest Scheme If you want guaranteed income and no market riskOPS If you are comfortable with investments, want portability, and tax-savingNPS
Ravindra Is the market risk in the New Pension Scheme fair for government employees, compared to the fixed security of the Old Pension Scheme?
