Old Pension Scheme (OPS) 2025 & Latest Updates

Rakhal das

Sep 27, 2025

Old Pension Scheme (OPS): Complete Guide 2025

Introduction

The Old Pension Scheme (OPS) is a government-backed retirement plan that was available to central and state government employees in India before 1 January 2004. It guaranteed a fixed lifetime pension to retired employees, based on their last drawn salary, without requiring any employee contribution during their service period.

After 2004, the New Pension Scheme (NPS) replaced OPS for most new recruits, but OPS remains a widely discussed topic due to its benefits, security, and political significance. Some states have even started reverting to OPS for their employees.

Key Features of the Old Pension Scheme (OPS)

Feature	Details
Applicability	Central & state government employees who joined service before 01.01.2004
Contribution	No employee contribution required
Pension Amount	50% of the last drawn basic pay + DA (Dearness Allowance)
Dearness Relief	Pension increases with DA revisions, providing inflation protection
Family Pension	Provided to the dependent family members after the employee’s death
Gratuity	Eligible for retirement gratuity and death gratuity
Tax Benefits	Pension income is taxable, but certain exemptions apply

Pension Calculation under OPS

The pension amount is calculated using this formula:

Pension = (Last drawn basic salary + DA) × 50%

For example:
If the last drawn basic salary is 70,000 and DA is ₹20,000 →
Total = 90,000
Pension = 90,000 × 50% = 45,000 per month

Additionally, pensioners receive DA hikes twice a year, just like serving employees.

Benefits of the Old Pension Scheme

Guaranteed Pension – Fixed pension for life ensures financial stability after retirement.
Inflation Protection – DA-linked pension increases keep pace with cost of living.
Family Pension Security – Ensures support for spouse/dependents after the employee’s death.
No Contribution Burden – Employees don’t need to invest any portion of their salary.
Gratuity & Other Benefits – Lump sum payment at retirement adds extra security.

Drawbacks of OPS

High Fiscal Burden – Government bears the entire pension cost, affecting budget sustainability.
No Individual Pension Fund – Pension is not linked to actual savings or investments.
Demographic Pressure – Increasing life expectancy means governments must pay pensions for longer durations.
Not Portable – OPS is tied to government service; private sector employees cannot avail it.

OPS vs NPS: A Quick Comparison

Feature	OPS (Old Pension Scheme)	NPS (New Pension Scheme)
Start Date	Before 2004	Implemented from 2004
Contribution	No employee contribution	Employee & govt both contribute
Pension	Fixed 50% of last salary	Market-linked, depends on corpus
DA Benefit	Yes, pension revised with DA	DA not applicable
Portability	Limited	Portable across sectors
Risk	Government bears risk	Market risk shared by employee

OPS Revival: Recent Developments

Several states have recently announced a return to the Old Pension Scheme due to employee demands and political promises.

States that have announced or implemented OPS revival include:

Rajasthan
Chhattisgarh
Himachal Pradesh
Punjab
Jharkhand

The Central Government, however, continues to follow NPS for new recruits. The issue remains a major point of debate between employee unions, economists, and policymakers.

Who is Eligible for OPS Today?

Central and state government employees who joined service before 01.01.2004
Employees of states that have officially revived OPS (subject to state rules)
Certain specific categories like armed forces personnel, who still have separate pension rules

Conclusion

The Old Pension Scheme (OPS) remains popular among government employees for its security, stability, and inflation protection. However, it also poses fiscal challenges for governments.

As debates over OPS vs NPS continue, employees must stay informed about their pension entitlements, state policies, and long-term financial planning.