No Revival of Old Pension Scheme for Central Government Employees, Confirms Finance Minister Nirmala Sitharaman
Finance Minister Nirmala Sitharaman has put an end to speculation about the possible return of the Old Pension Scheme (OPS) for central government employees. Speaking in a written reply to the Lok Sabha on Monday, she made it clear that there is no proposal under consideration to restore OPS for employees who are currently covered under the National Pension System (NPS).
This clarification is significant, as the demand for OPS revival has been gaining momentum among central government employees, particularly after several states decided to bring back the scheme for their staff. However, the Centre’s stance remains firm — there will be no rollback from NPS to OPS.
Under OPS, the pension amount for a retired government employee was calculated based on their last drawn salary, and the entire cost was borne by the government. This system ensured a guaranteed lifelong pension for retirees, providing them with financial security irrespective of market fluctuations.
However, the financial burden on the government under OPS was substantial, as it was a fully funded liability with no employee contribution. This growing liability prompted the shift to a new pension model in the early 2000s.
Introduced in 2004 for central government employees (except armed forces), the NPS is a contributory pension scheme in which both the employee and the government make regular contributions during the employee’s service period. The retirement benefits under NPS are not fixed; instead, they depend on the returns generated by the market-based investments.
This change was aimed at reducing the long-term financial load on the exchequer while introducing a more sustainable, investment-linked model.
Experts believe that returning to OPS would significantly increase the government's financial burden in the long run. Since OPS offers guaranteed pensions funded entirely by the government, it creates a recurring liability that grows as the number of retirees increases.
In contrast, NPS ensures that the government’s contribution is limited and predictable, with the investment risk spread over time and shared with employees. This makes it a more financially sustainable option for the Centre.
Finance Minister Sitharaman’s statement reinforces the government’s position that OPS is no longer a viable option for central employees, despite political and employee pressure.
In recent years, several states, including Rajasthan, Chhattisgarh, Punjab, and Himachal Pradesh, have announced a return to OPS for their state government employees. These moves have strengthened calls from central government employees and unions to demand similar benefits.
However, the Centre remains unmoved, emphasising that any such decision would contradict the government’s fiscal discipline goals.
With the Finance Minister’s latest clarification, it is now evident that the Old Pension Scheme will not be restored for central government employees. The National Pension System will remain the default pension structure, balancing employee contributions with government support, and linking retirement benefits to market performance rather than fixed guarantees.
While OPS may offer certainty to employees, NPS is designed to ensure long-term sustainability for the nation’s finances — a priority the central government is not willing to compromise.
