In November 2025, the central government reaffirmed its decision: the Old Pension Scheme will not be brought back. The reason? It’s simply too expensive and unsustainable for India’s long-term economy. But there’s more to this story — because in its place, a new system has quietly taken shape: the Unified Pension Scheme (UPS).
Why the Old Pension Scheme Is Off the Table
Let’s rewind a bit. The OPS was discontinued back in 2004, replaced by the New Pension System (NPS) — a market-linked plan where both the employee and employer contribute.
So, why is the government refusing to revive OPS despite pressure from unions? The answer lies in one phrase: “unfunded cost.”
Under OPS, retirees are guaranteed 50% of their last drawn salary as pension, fully paid by the government. No contributions, no investment growth — just a lifelong payout. Sounds great for employees, right? But for the government, it’s a financial time bomb.
Officials warn that bringing OPS back would place an enormous burden on taxpayers and future generations. The 8th Central Pay Commission has also cautioned that reviving OPS could create massive fiscal liabilities, making it nearly impossible to sustain India’s growing pension commitments.
Enter the Unified Pension Scheme (UPS): A Balanced Middle Ground
Recognizing employee concerns, the government introduced the Unified Pension Scheme (UPS) in April 2025 — and it’s designed to offer the best of both worlds.
Here’s how UPS works:
- Employees are assured 50% of their average basic salary as pension (not last drawn, but averaged).
- It also includes market-linked benefits from NPS investments.
Think of it as a hybrid model — part guaranteed, part growth-oriented. You get the reliability of OPS with the earning potential of NPS.
This blended approach aims to balance fiscal discipline with employee welfare — giving government workers a more predictable post-retirement income without overburdening the economy.
Pension Schemes Comparison (2025)
| Scheme | Key Feature |
|---|---|
| Old Pension Scheme (OPS) | Guaranteed 50% of last drawn salary + DA, non-contributory |
| New Pension System (NPS) | Market-linked returns, contributory by employee and employer |
| Unified Pension Scheme (UPS) | Hybrid: 50% average salary pension + NPS investment benefits |
What This Means for Government Employees
If you’re a central government employee, this update means OPS won’t be returning — but UPS might just be a fair compromise. It offers:
- More stability than NPS alone
- A predictable pension base
- Continued growth through investment returns
Meanwhile, state governments remain divided. Some are exploring ways to bring back OPS, while others prefer to strengthen NPS or adopt UPS instead. The result is a mixed pension landscape across India — one that reflects both financial prudence and employee demands.
Why This Shift Matters
Now, why should this matter to you? Because pensions aren’t just about retirement — they’re about security, stability, and trust in the system.
The UPS shows that the government isn’t ignoring employee concerns; it’s trying to modernize pensions for a changing economy. By combining guaranteed benefits with market-based growth, UPS could become a sustainable model for the future.
It’s not the OPS comeback many hoped for, but it might be the realistic compromise India needs.
Frequently Asked Questions
1. Will the Old Pension Scheme (OPS) be restored in 2025?
No. The government has confirmed that OPS will not be restored, citing its heavy and unsustainable fiscal cost.
2. What is the Unified Pension Scheme (UPS)?
UPS is a new hybrid pension system launched in April 2025, combining the fixed pension benefit of OPS with the market-linked investment returns of NPS.
3. Why is OPS considered financially risky?
OPS is non-contributory, meaning the government bears the full cost. This creates a large, long-term liability that strains public finances.
4. Which scheme applies to new central government employees?
All new central government recruits are covered under NPS and the new Unified Pension Scheme (UPS) — not OPS.