Explained: Unified Pension Scheme Comparison with OPS vs NPS

In India
September 19, 2025
Parminder Kaur
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The Unified Pension Scheme (UPS) marks India’s biggest pension reform in decades. ABC Live explains how UPS compares with the Old Pension Scheme (OPS) and National Pension System (NPS), with data, analysis, and equity insights to guide employees, policymakers, and taxpayers before the September 2025 deadline.

New Delhi (ABC Live): The Unified Pension Scheme (UPS), launched in April 2025, is India’s most ambitious attempt to unify retirement security with fiscal discipline. It was born out of rising dissatisfaction with the National Pension System (NPS) and strong political demand for restoring the Old Pension Scheme (OPS).

OPS guaranteed lifelong security but created a heavy fiscal burden. NPS brought sustainability but left employees vulnerable to market fluctuations. UPS now promises a middle path — a contributory scheme with a guaranteed minimum pension, proportional benefits, and an assured 50% payout for long service.

With the 30 September 2025 deadline for employees to opt into the Unified Pension Scheme, this report presents a performance audit of India’s pension journey — from OPS to NPS to UPS.

Why ABC Live is Publishing This Report Now

September 2025 is a turning point:

The Unified Pension Scheme became effective on 1 April 2025.
Employees must decide by 30 September 2025 whether to switch.
Debate has been reduced to slogans — “bring back OPS” or “defend NPS” — while the details of UPS remain underexplored.

ABC Live publishes this audit now to cut through political noise with evidence-based insights for employees, policymakers, and taxpayers.

How This Report is Unique

Three-Lens Analysis — We connect law, economics, and social justice instead of focusing only on finances.
Performance Audit — We present data tables and real payout scenarios, not just scheme summaries.
Global Context — India’s reforms are compared with OECD and World Bank pension models.
Equity Focus — We show who benefits more — low-paid staff or high-paid officers.
Timeliness — Published before the decision deadline, making it a practical guide.

Old Pension Scheme (OPS): Idea, Compulsion, and Revelation

Idea: Guarantee 50% of last pay as lifelong pension to ensure loyalty and dignity.
Compulsion: Feasible in early decades with a small government workforce.
Revelation: By the 1990s, pensions consumed 15–20% of state revenues in some states. OPS became unsustainable, heavily skewed toward higher officers, and dependent on future taxpayers.

National Pension System (NPS): Idea, Compulsion, and Revelation

Idea: Move to a defined contribution, market-linked system where employees and government both contribute.
Compulsion: OPS liabilities ballooned; reform was necessary in 2004.
Revelation: NPS created discipline and a retirement corpus but exposed employees to market risks. No minimum pension meant low-paid staff faced insecurity, sparking protests and political backlash.

Unified Pension Scheme (UPS): Idea, Compulsion, and Revelation

Idea: A hybrid system that unifies OPS-like security with NPS-like sustainability.
Compulsion: Unions demanded OPS restoration; the government could not fiscally afford it. UPS became a political-economic compromise.
Revelation: UPS introduces balance — predictability, equity, and fiscal prudence:
- 50% of last pay as pension after 25 years service.
- Proportionate pension for 10–24 years service.
- Guaranteed ?10,000/month minimum after 10 years service.
- Higher government contribution (18.5%) than NPS (14%).

Data and Performance Audit

Fiscal Impact of OPS

Pension spending in FY 2024–25: ?5.5 lakh crore (?9% of revenue receipts).
Some states spend 15–20% of revenues on pensions, squeezing funds for health and education.
?? OPS = security without sustainability.

NPS Corpus Growth Example

For an employee earning ?50,000/month (basic + DA):

Contributions: ?12,000/month (Employee + Govt).
Over 30 years: ?43.2 lakh contribution.
With 8% returns: ~?1.5 crore corpus.
At retirement:
- 60% lump sum (~?90 lakh).
- 40% annuity (~?30,000/month pension).

?? NPS = sustainability but insecurity.

Unified Pension Scheme Example (20 Years Service)

Salary (Basic+DA)	UPS Pension	NPS Pension	Remarks
?10,000/month	?10,000 (minimum floor)	~?3,400	UPS hugely better
?50,000/month	?20,000	~?17,000	UPS slightly better
?1,00,000/month	?40,000	~?34,000	UPS predictable; NPS offers lump sum wealth

?? UPS = balance of equity and sustainability.

Comparative Snapshot: OPS vs NPS vs UPS

Feature	OPS	NPS	UPS
Nature	Defined Benefit	Defined Contribution	Hybrid
Contribution	Govt-funded	10% Employee + 14% Govt	10% Employee + 18.5% Govt
Pension Formula	50% of last pay	Market-based (depends on corpus)	50% of last pay (25 years) / proportionate / ?10,000 floor
Family Pension	Yes	Yes (via annuity)	Yes
Inflation Indexing	Full DA-linked	Market-dependent	Intended indexing
Fiscal Burden	Very high	Sustainable	Moderate
Winners	Higher-paid officers	Higher salaries (good markets)	Low-paid employees; balanced equity

Evolution in One Line

OPS: Security without sustainability.
NPS: Sustainability without security.
Unified Pension Scheme: A balance between both.

Editor’s Note

At ABC Live, we believe journalism must connect law, economics, and governance with lived realities. The pension debate is not just about government employees — it is about fiscal stability, intergenerational fairness, and social equity.

By auditing OPS, NPS, and the Unified Pension Scheme with data and performance analysis, we aim to move the conversation beyond politics and slogans, toward informed choice and accountability.