Why Government Employees Still Prefer the Old Pension Over NPS and UPS Since the old pension scheme was scrapped in 2004, government employees have kept pushing for a guaranteed pension. Even after NPS and now UPS, most still lean towards OPS, here is what actually separates the three schemes. For nearly two decades, no issue has dominated conversations among government employees in India quite like pension. Ever since the old pension arrangement was shut in 2004, the debate over how retired employees will be looked after has never really stopped. The government first rolled out the National Pension System, or NPS, but employees pushed back hard because it is tied directly to the market and carries no guarantee on the pension amount. The government then introduced the Unified Pension Scheme, or UPS, yet even a guaranteed pension component failed to win employees over completely. Their demand still centres on a return to the old pension arrangement, known as OPS. With three separate schemes now in play, deciding which one actually works best has become confusing for the ordinary employee, so here is a detailed look at what each scheme really offers. Why the old pension scheme remains the gold standard Before 2004, every government employee in the country was covered under the old pension scheme. Employee contributions under it were minimal, routed through what was called the Government Provident Fund, or GPF. Employees could also withdraw money from their GPF account from time to time whenever needed. Despite that, on retirement they directly received 50 percent of their last take-home salary as pension. The entire balance sitting in the GPF account was also paid out separately as a lump sum. Just like a regular salary, this pension also got a dearness allowance top-up every 6 months, meaning the pension amount kept rising over time. That is precisely why a large number of employees still want this old arrangement restored, since it carried neither market risk nor any uncertainty over income after retirement. NPS's biggest drawback: dependence on the market The moment the government implemented NPS in 2004, employee unions began opposing it. Their central objection was that the scheme offers no guarantee whatsoever on the pension amount. Initially, both the employee and the government contributed 10 percent each, and this money was invested in the stock market along with other investment options. The government later raised its own contribution to 14 percent, which means a combined 24 percent of an employee's basic pay and dearness allowance is now invested in the NPS account every month. Whatever returns this investment earns keep adding to the employee's corpus. At retirement, 60 to 80 percent of this entire corpus can be withdrawn as a lump sum, while the remaining amount must compulsorily go towards buying an annuity. The interest earned on that annuity is then split into 12 equal parts and paid out every month as pension. This effectively means the pension an employee receives after retirement depends entirely on how much they contributed during their career and how well the market performed, which is considered the scheme's biggest flaw. On top of that, the pension under NPS does not carry any dearness allowance benefit, which is its second major risk, as rising inflation keeps eroding the real value of the pension. UPS offers a guarantee, but the lump sum has a catch Faced with employee discontent, the government combined features of both NPS and OPS to build a new scheme called the Unified Pension Scheme, or UPS. It was launched roughly 2 years ago. It does include a provision for a guaranteed pension after retirement, but that guarantee comes with a significant catch. The government built in two major provisions here. First, after retirement, an employee gets 40 percent of their basic salary as a guaranteed pension. Second, this pension also gets a dearness allowance benefit added every 6 months. While UPS did deliver on the promise of a guaranteed pension, its biggest flaw is that the pension is calculated only on the basic salary, whereas employees argue that a large chunk of their salary is made up of dearness allowance too, and that should also be counted while fixing the pension. Beyond that, the weakest link in UPS concerns the lump sum paid out at retirement. Under this scheme, roughly 70 to 80 percent of the combined contribution made by the employee and the government is not handed over as a lump sum at retirement. And if an employee opts to withdraw a larger lump sum, the monthly pension they receive gets reduced as a result. Why the confusion among employees refuses to go away Looking at all three schemes together, it is clear that under the old pension scheme, employees never had to worry about market swings nor fear a cut in their lump sum payout. Under NPS, that entire risk shifts onto the employee's shoulders, since the pension amount rests on both market performance and their own contribution. UPS is clearly an attempt to find a middle path between the two, it does offer a guaranteed pension, but the restricted calculation based only on basic salary and the large cut in the lump sum amount mean it still fails to fully satisfy employees. That is exactly why, even with three separate options on the table, employee unions continue to press for nothing less than the return of the old pension scheme. What this means for you If you are a government employee or planning for retirement, it is worth working out exactly how much security your particular pension scheme will actually give you in old age. • NPS employees should track their own returns: If you fall under NPS, your pension depends directly on market performance. Review your corpus and investment choices periodically so the payout does not fall short at retirement. • Do the basic-salary math before relying on UPS: UPS fixes the guaranteed pension at 40 percent of basic salary alone, excluding dearness allowance. Check your salary slip to estimate what your real guaranteed pension will actually come to. • Think carefully before withdrawing a bigger lump sum: Under UPS, opting for a larger lump sum cuts your monthly pension. Work out the balance between immediate cash needs and long-term monthly income before you decide. • Factor in the dearness allowance gap: OPS and UPS both add a dearness allowance top-up to pension every 6 months, while NPS offers no such benefit. Over a long retirement, this difference can significantly affect real income. • Don't assume the old GPF-style flexibility still exists: The periodic withdrawal facility that came with the old pension scheme is not built into the newer schemes the same way. Keeping separate emergency savings is a safer bet. Why this happened The confusion around having three separate pension schemes did not appear overnight, it is the result of a chain of decisions stretching back nearly 20 years. • The 2004 shutdown of the old pension scheme was the starting point: The moment OPS was replaced with NPS, employees moved from a guaranteed pension to one tied to uncertain market outcomes, and opposition has continued ever since. • NPS's own structure is the root of the discontent: A pension entirely dependent on contributions and market returns, with no dearness allowance benefit attached, together erode employee confidence in the scheme. • UPS was introduced as a hybrid fix: To ease employee resentment, the government launched UPS roughly 2 years ago by combining elements of both NPS and OPS, aiming to blend a guarantee with contribution-based funding. • UPS's own conditions then created fresh discontent: Restricting the pension calculation to basic salary alone, and cutting 70 to 80 percent of the lump sum at retirement, kept UPS from being fully accepted, which is why the demand still centres on OPS. Questions & Answers 1. When was the old pension scheme, OPS, shut down? The government discontinued the old pension scheme in 2004. 2. How much pension did employees get under OPS? At retirement, employees directly received 50 percent of their last take-home salary as pension. 3. What is the employee and government contribution under NPS? Both initially contributed 10 percent each, the government's share was later raised to 14 percent, so a combined 24 percent of basic pay and DA now goes into NPS. 4. How much of the NPS corpus can be withdrawn as a lump sum at retirement? 60 to 80 percent of the total corpus can be withdrawn as a lump sum, while the rest must compulsorily be used to buy an annuity. 5. How much guaranteed pension does UPS offer? After retirement, employees get 40 percent of their basic salary as a guaranteed pension. 6. What is considered UPS's biggest flaw? The pension is calculated only on basic salary, and 70 to 80 percent of the total contribution is not paid out as a lump sum at retirement. 7. When was UPS launched? The government launched UPS roughly 2 years ago. 8. Does the pension under NPS include a dearness allowance benefit? No, the pension paid under NPS does not carry any dearness allowance benefit. https://trendkia.com/en/money/purani-penshana-ka-moha-kyon-nahin-chhora-pa-rahe-karmachari-samajhie-ops-nps-aura-ups-ka-pura-ganita-29516 TrendKia — Har trend, sabse pehle.