Unified Pension Scheme: a suitable compromise for pensioners?
Mint looks at the pros and cons of all three: It is a new hybrid pension scheme for government employees that, like OPS, guarantees an assured monthly pension of 50% of their last drawn salary before superannuation while retaining the contributory element of the NPS. The employee contributes 10% of their salary while the government puts in 18.5%. It factors in inflation through dearness allowance hikes.
It includes a family pension and guarantees a lump sum, apart from gratuity, at retirement. Employees with 10 years of experience will get ₹10,000 per month as assured pension. It takes effect on 1 April 2025.
NPS was unpopular as the quantum of monthly pension was not guaranteed. It depended entirely on the returns the fund managers—regulated by the Pension Fund Regulatory and Development Authority—make from investing the employees’ and the government’s contributions in equity and other market-linked securities. As the returns were low, pensions under NPS were lower than what OPS offered.
Also, NPS did not account for the dearness allowance hike in line with inflation. When NPS came into effect in April 2004, 27 states joined, but five of them have reverted to OPS in recent years. OPS was an unfunded pension scheme and was entirely paid for by the government.
As India aged and more government employees retired, the expense became unsustainable for many states, weakening them financially and increasing their debt. Studies put OPS’ fiscal burden at 4.5 times NPS’. It took more than a decade to build bipartisan consensus and implement NPS.
It should as NPS’ major pain points have been addressed. This will ensure that the pension from OPS is not very different from that of UPS. Resentment against NPS rose as the quantum of
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