You have been an employee for decades and now you and your co-workers are just waiting to retire. But what if your retirement savings got smaller as the market went down? For so many employees of the Indian government this nightmare was their life under the New Pension Scheme. But in 2025, the faintest rumor of the revival of the Old Pension Scheme gives rise to the hope that the past will mingle with the present in the shape of reforms. The October month is promising for the update on the Old Pension Scheme (OPS) as it comes with the not only nostalgia but also the promise of a safer tomorrow.
Revival Rumors States Lead The Charge
The states are emerging as the deciders of the pension dreams. Rajasthan, Chhattisgarh, Himachal Pradesh, and Punjab disallowed OPS at the beginning of the year allowing 50% of the last-drawn salary as a guaranteed pension. The first wave pushed the Centre where employee unions came with strikes and petitions to rally. By May 2025, insiders were whispering about a mid-year announcement, but the fiscal hawks were adamant. Instead, hybrid models came into being, mixing OPS benefits with NPS discipline. Political manifestos supplied the fire, converting pensions into a treasure of elections. Nevertheless, experts caution that hidden costs might also pop up, like growing state debt that takes a toll on public services.
Unified Path Forward UPS Takes Center Stage
The Unified Pension Scheme (UPS), launched, January 24, 2025, is a compromise jewel. It guarantees for 25 years of service 50% of average basic pay over 12 months—echoing OPS without the unfunded pitfalls—effectively April 1. Unlike pure OPS, UPS is fully funded, with government topping up shortfalls. By August, only 32,000 out of 2.3 million eligible opted in, citing paperwork woes. Nirmala Sitharaman, the Finance Minister, quashed full OPS revival in Parliament, calling it “unsustainable.” UPS adds family pensions at 60% and inflation-linked hikes, thus softening NPS’s market risks. For early retirees, new rules ease commutation taxes, which means their take-home pay is now increased.
OPS vs The New Guard A Quick Face-Off
| Feature | Old Pension Scheme (OPS) | Unified Pension Scheme (UPS) | New Pension Scheme (NPS) |
|---|---|---|---|
| Benefit Type | Guaranteed 50% of last salary + DA | Assured 50% average pay, govt-backed | Market-linked returns |
| Funding | Unfunded (pay-as-you-go) | Fully funded with contributions | Employee/govt contributions |
| Risk | None for employee | Minimal, govt guarantees | High volatility |
| Applicability | Pre-2004 hires, select states | Central employees opting in | Post-2004 default |
| 2025 Update | State revivals | April rollout, low uptake | Enhanced tax deductions |
Also Read: 7th Pay Commission DA Hike 2025: Central Employees Set To Get A Major Salary Boost