The call to reinstitution of the Old Pension Scheme (OPS) came to a fever pitch in mid-2025 due to the increased pressure on the central government employees. Dreams about possible recovery ended up with the definitive refusal at the Finance Ministry, leaving clear limits as to what may be possible in future with regard to pension reforms.
Government’s Parliamentary Response
Finance Minister, Nirmala Sitharaman, however, confirmed that the government has no such proposal to reintroduce OPS to the employee under the National Pension System (NPS), during Monsoon Session of the Parliament in August 2025. She referred to the unsustainability of the financial burden imposed by the guaranteed OPS payouts and repeated that NPS will be the default scheme to those joining on and after January 1, 2004.
Unified Pension Scheme Option
Concerns have been raised that returns in NPS were market-linked and to overcome that, the government introduced the Unified Pension Scheme (UPS) in April 2025. UPS has a defined benefit of 50 percent of final drawn salary after 25 years with contributions to NPS blended with guaranteed payment. Take up has since performed slowly, with only approximately 32,000 of 2.3 million qualifying workers taking part through to August 2025.
Pre-2004 Recruitment Clause
There was clarification of one-time possibility of appointment of staff recruited on vacancies announced before December 22, 2003 but appointed after January 1, 2004. Such employees were allowed until March 2023 to transfer to the old pension provisions in a special memorandum. This option will not be extended further and new entrants are not permitted to use these OPS benefits.
Comparison of Pension Schemes
| Feature | Old Pension Scheme (OPS) | National Pension System (NPS) | Unified Pension Scheme (UPS) |
|---|---|---|---|
| Benefit Type | Defined benefit | Defined contribution | Hybrid defined benefit |
| Employee Contribution | None | 10 percent of basic pay + DA | 10 percent of basic pay + DA |
| Government Contribution | Full pension | 14 percent of basic pay + DA | 18.5 percent of basic pay + DA |
| Guaranteed Pension | 50 percent of last salary | Market-linked returns | 50 percent of last salary (25 yrs) |
| Applicability | Pre-2004 employees | Post-2004 employees | Optional for NPS subscribers |
Conclusion
The 2025 update strongly marks boundaries around OPS where defined-benefit pensions will never be resurrected in the case of NPS members. Although UPS is putting on a safety net, its lukewarm reaction implies that more adjustments are supposed to be carried out. Employees need to consider their pension options at this point and be wary of any additional amendment.
Also read: Fitment Factor Hike 2025: Fitment Multiplier Range and Salary Projections