UPS vs NPS vs OPS: Each scheme has its own advantages and disadvantages. Hence, before choosing any scheme, you must take your requirements and financial situation into consideration. Which scheme is better depends on individual needs.
Best pension schemes in India: Read the rules carefully before investing in any scheme
Many changes have been made in the pension schemes in India over time. The Government of India had earlier implemented the Old Pension Scheme (OPS) for the financial security of the employees after retirement. But with changing times, the government discontinued it and started the New Pension Scheme (NPS) in its place. There was a long-standing protest against NPS and employees were demanding to bring back the old scheme. However, the government did not restore the old scheme, but keeping this demand in mind, the government has started a new scheme, Unified Pension Scheme (UPS).
These changes in pension schemes have been made based on the economic conditions, government policies and the demands of the employees. Let us understand these changes in detail.
OPS was the oldest scheme in which employees received a fixed part of their last salary as pension after retirement. This scheme was quite popular among employees as the pension amount was fixed and kept increasing with the dearness allowance.
This is a scheme brought in place of OPS. In this, both the employee and the government deposit money and after retirement, pension is received from this money. In NPS, the pension amount is not fixed, but keeps changing according to the fluctuations in the market. Due to the pension amount not being fixed, there is uncertainty of income after retirement. Which is a matter of concern for many employees.
NPS is considered more transparent and flexible. It also has investment options which can increase the pension amount after retirement.
To overcome some of the shortcomings in NPS, the government launched UPS. It will be implemented from April 1, 2025. There was a lot of dissatisfaction among the employees regarding NPS. They wanted a fixed pension like OPS. That is why the government brought UPS. UPS has the benefits of both OPS and NPS. In this scheme, like OPS, the pension amount will be fixed and will keep increasing with dearness allowance. Also, the family will also get pension after retirement. In this, the pension amount will be fixed, but at the same time there will be a possibility of getting returns through investment.
Financial pressure: Due to increasing population and inflation, the pension burden on the government was increasing. Due to the fixed amount of pension under OPS, the government had to bear a huge financial burden. The government ended it on the grounds that this scheme is not financially sustainable and can become a burden for future generations. NPS was introduced in place of OPS so that the pension burden on the government could be reduced.
Investment and risk: Through NPS, the government wanted employees to save for their retirement and also get benefits according to market fluctuations. There is a possibility of getting better returns through investment in NPS
Employees' Demand: Many employees were demanding to bring back OPS because the pension amount was not fixed in NPS.
Every scheme has its own advantages and disadvantages, therefore, before choosing any scheme you should take into account your requirements and financial situation. Which scheme is better depends on individual needs.
OPS: If you want a fixed pension and want to avoid taking risk, then OPS can be a better option for you.
NPS: If you are willing to take a little risk and want good returns from the market, then NPS can also be a good option.
UPS: If you want both the fixed pension of OPS and the investment benefits of NPS, then UPS can be the best option for you.
It is clear from the changes in the pension schemes that the government is continuously making efforts to ensure the financial security of the employees after retirement.
