{"id":33321,"date":"2023-01-17T02:43:14","date_gmt":"2023-01-16T21:13:14","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=33321"},"modified":"2026-04-22T12:43:21","modified_gmt":"2026-04-22T07:13:21","slug":"old-pension-scheme-vs-new-pension-scheme","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/old-pension-scheme-vs-new-pension-scheme\/","title":{"rendered":"Old Pension Scheme vs New Pension Scheme"},"content":{"rendered":"<h3><strong>What\u2019s in today\u2019s article?<\/strong><\/h3>\n<ul>\n<li><strong>Why in News?\u00a0<\/strong><\/li>\n<li><strong>What is Old Pension Scheme (OPS)?<\/strong><\/li>\n<li><strong>What were the concerns with the OPS?<\/strong><\/li>\n<li><strong>What is New Pension Scheme (NPS)?<\/strong><\/li>\n<li><strong>What is the Difference between NPS and OPS?<\/strong><\/li>\n<li><strong>News Summary<\/strong><\/li>\n<\/ul>\n<h2><strong>Why in News?<\/strong>\u00a0\u00a0<\/h2>\n<ul>\n<li>Recently, the Reserve Bank of India (RBI) has cautioned against the reintroduction of the Old Pension Scheme (OPS) by some states.\u00a0<\/li>\n<\/ul>\n<h2><strong>What is Old Pension Scheme (OPS)?<\/strong><\/h2>\n<ul>\n<li>OPS offers pensions to government employees on the basis of their last drawn salary.\u00a0 <strong>50% of the last drawn salary<\/strong>.<\/li>\n<li>The attract\u00a0ion of the Old Pension Scheme or \u2018OPS\u2019 lay in its promise of an assured or \u2018defined\u2019 benefit to the retiree. It was hence described as a \u2018<strong>Defined Benefit Scheme<\/strong>\u2019.<\/li>\n<li>To illustrate, if a government employee\u2019s basic monthly salary at the time of retirement was Rs 10,000, she would be assured of a pension of Rs 5,000.\u00a0<\/li>\n<li>Also, like the salaries of government employees, the monthly pay-outs of pensioners also increased with hikes in dearness allowance or DA announced by the government for s\u00a0erving employees.<\/li>\n<li>The OPS was discontinued by the Central government in 2003.<\/li>\n<\/ul>\n<h2><strong>What were the Concerns with the OPS?\u00a0<\/strong><\/h2>\n<ul>\n<li>The main problem was that the pension liability remained unfunded \u2014 that is, <strong>there was no corpus specifically for pension<\/strong>, which would grow continuously and could be dipped into for payments.<\/li>\n<li>The Government of India budget provided for pensions every year; there was no clear plan on how to pay year after year in the future.<\/li>\n<li>The \u2018pay-as-you-go\u2019 scheme created <strong>inter-generational equity issues<\/strong> \u2014 meaning the present generation had to bear the continuously rising burden of pensioners.<\/li>\n<\/ul>\n<h2><strong>What is New Pension Scheme (NPS)?<\/strong><\/h2>\n<ul>\n<li>As a substitute of OPS, the NPS was introduced by the Central government in <strong>April, 2004<\/strong>.\u00a0<\/li>\n<li>This pension programme is open to employees from the <strong>public<\/strong>, <strong>private<\/strong> and even the <strong>unorganised<\/strong> <strong>sectors<\/strong> except those from the armed forces.<\/li>\n<li>The scheme encourages people to invest in a pension account at regular intervals during the course of their employment.<\/li>\n<li>After retirement, the subscribers can take out a certain percentage of the corpus.<\/li>\n<li>The beneficiary receives the remaining amount as a monthly pension, post retirement.<\/li>\n<li><strong>Nodal agency:<\/strong> Pension Fund Regulatory and Development Authority (PFRDA)<\/li>\n<li><strong>Eligibility:\u00a0<\/strong><\/li>\n<li>Any Indian citizen <strong>between 18 and 60 years<\/strong> can join NPS.<\/li>\n<li><strong>NRIs<\/strong> (Non-Residential Indians) are also eligible to apply for NPS.<\/li>\n<li><strong>Permanent Retirement Account Number (PRAN):<\/strong>\n<ul>\n<li>Every NPS subscriber is issued a card with 12-digit unique number called Permanent Retirement Account Number or PRAN.\u00a0<\/li>\n<\/ul>\n<\/li>\n<li><strong>Minimum contribution in NPS: <\/strong>The subscriber has to contribute a minimum of <strong>Rs. 6,000 in a financial year<\/strong>.<\/li>\n<li>If the subscriber fails to contribue the minimum amount, his\/her account is frozen by the PFRDA.<\/li>\n<li><strong>Who manages the money invested in NPS?\u00a0<\/strong><\/li>\n<li>The money invested in NPS is managed by PFRDA-registered Pension Fund Managers.<\/li>\n<li>At the moment, there are eight pension fund managers.<\/li>\n<\/ul>\n<h2><strong>What is the Difference between OPS and NPS?\u00a0<\/strong><\/h2>\n<ul>\n<li>The Old Pension Scheme is a <strong>pension-oriented scheme<\/strong>. It offers regular pensions to employees during retirement. The pension amount is 50% of the last drawn salary by the employee.\u00a0\u00a0\n<ul>\n<li>Thus, in OPS, <strong>the pension amount is constant<\/strong>.<\/li>\n<\/ul>\n<\/li>\n<li>On the other hand, the National Pension Scheme is an <strong>investment cum pension scheme<\/strong>.\u00a0\u00a0<\/li>\n<li>NPS contributions are invested in market-linked securities, i.e., equity and debt instruments.\n<ul>\n<li>Therefore, <strong>NPS doesn\u2019t guarantee returns<\/strong>.<\/li>\n<\/ul>\n<\/li>\n<li>However, the investments, in NPS, are volatile and hence have the potential to generate significant returns.<\/li>\n<\/ul>\n<h2><strong>News Summary<\/strong><\/h2>\n<p>\u00a0Image Caption: Pension to Revenue Expenditure Ratio<\/p>\n<ul>\n<li>The RBI has red-flagged the return to the Old Pension Scheme (OPS) by some states as a major concern on the sub-national fiscal horizon.\u00a0<\/li>\n<li>The RBI said \u201c<i><strong>by postponing current expenses to the future, states risk accumulation of unfunded pension liabilities in the coming years\u201d<\/strong><\/i>.\u00a0<\/li>\n<li>Several states, including Himachal Pradesh, Jharkhand, Punjab, Chhattisgarh and Rajasthan have announced a return to the OPS, promising retired government employees 50% of the last pay drawn as the monthly pension.\u00a0<\/li>\n<li>Several economists have criticised the move by the states. In several cases, the pension outgo is already high (see graphic below).<\/li>\n<\/ul>\n<p><strong>Source:<\/strong>\u00a0<strong><a href=\"https:\/\/timesofindia.indiatimes.com\/business\/india-business\/rbi-red-flags-return-of-ops-in-some-states\/articleshow\/97042628.cms\" target=\"_blank\" rel=\"nofollow noopener\"><u>TOI<\/u><\/a>\u00a0|<\/strong><a href=\"https:\/\/indianexpress.com\/article\/explained\/old-pension-scheme-debate-economics-politics-explained-8272808\/\" target=\"_blank\" rel=\"nofollow noopener\"><u><strong>IE<\/strong><\/u><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Pension is a payment or series of payments made to you after you retire from work.<\/p>\n","protected":false},"author":5,"featured_media":33322,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[18],"tags":[7034],"class_list":{"0":"post-33321","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-upsc-mains-current-affairs","8":"tag-old-pension-scheme-vs-new-pension-scheme","9":"no-featured-image-padding"},"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/33321","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=33321"}],"version-history":[{"count":2,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/33321\/revisions"}],"predecessor-version":[{"id":99644,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/33321\/revisions\/99644"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/33322"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=33321"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=33321"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=33321"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}