Central Government Stands Firm: Old Pension Scheme Unlikely, RBI Issues Warning

In a decisive move, the Central Government, led by Minister of State for Finance Pankaj Chaudhary, has determined that the Old Pension Scheme (OPS) will not be reinstated. Minister Chaudhary further announced the establishment of a committee, chaired by the Finance Secretary, aimed at addressing specific issues under the New Pension Scheme (NPS). This proactive measure underscores the government’s commitment to effectively resolve challenges associated with the existing pension framework.

Addressing a query, Minister Pankaj Chaudhary affirmed that the committee, under the stewardship of the Finance Secretary, is tasked with delivering a comprehensive report on reform measures within the New Pension Scheme (NPS) framework. Importantly, he emphasized that the committee’s focus lies solely on NPS enhancements, with no contemplation of revisiting the provisions of the old pension scheme.

Concurrently, the Reserve Bank of India (RBI) issued a cautionary report, advising state governments against the proposal to extend the Old Pension Scheme Hybrid (OPSH) to 50 lakh employees by requesting a substantial deposit of Rs 2.5 lakh crore in the NPS. The RBI underscored the potential lack of fiscal discipline associated with such a plan, urging states to exercise prudence in their financial strategies.

As per the Reserve Bank of India’s assessment, states are projected to allocate a substantial sum of 17 lakh crore rupees towards the Old Pension Scheme (OPS) in the pension fund by the year 2050. In contrast, a comparatively lesser amount of 4 lakh crore rupees is anticipated to be directed to the New Pension Scheme (NPS) during this period.

This fiscal distribution, as outlined by the RBI, raises concerns regarding the potential adverse impact on the economic condition of the states. The disparity in fund allocation between OPS and NPS could potentially lead to a deterioration in the financial health of the states, limiting the available resources for developmental initiatives. This underscores the necessity for careful consideration and strategic financial planning to ensure a balanced and sustainable approach to pension fund management.

Limited Implementation of Old Pension Scheme (OPS) Creates Disparities Among States

In a significant development, approximately 50 lakh employees and officers, hired since 2004, are advocating for the reinstatement of the Old Pension Scheme (OPS). Notably, the non-Bharatiya Janata Party (BJP) governments in five states—Rajasthan, Himachal Pradesh, Chhattisgarh, Punjab, and Jharkhand—within the past five years, declared the adoption of OPS.

However, despite the announcement, the practical realization of the OPS benefits for retired employees varies among these states. Presently, only Himachal Pradesh has effectively implemented the OPS, while in other states, the status of the scheme remains largely on paper. In Rajasthan, for instance, some retired employees have received the OPS benefits, while others have not.

In a unique approach, the Jharkhand government has mandated the return of its contribution from employees benefiting from OPS, whereas Punjab has issued only a declaration without providing concrete benefits as of now. Across all five states, a substantial deposit of Rs. 2.5 lakh crore in the National Pension Scheme (NPS) has been requested for reimbursement. However, the central government has outrightly rejected this demand, citing the absence of provisions for reimbursement under the PARDA Act. This divergence in the implementation of OPS highlights the complexities and challenges associated with the adoption of pension schemes across different states in India.

Escalating Pension Burden: A Growing Challenge for State Governments

The pension burden on state governments has exhibited a consistent upward trajectory, evolving from 0.6% of the Gross Domestic Product (GDP) in 1990 to 1.7% in the fiscal year 2022-23. This trend reflects the increasing financial strain posed by pension obligations on state budgets.

Projections indicate that between 2023 and 2037, approximately 20% of employees enrolled in the National Pension Scheme (NPS) are expected to retire. Subsequently, from 2038 to 2052, this figure is anticipated to surge to 60%. This impending surge in retirements underscores the critical need for strategic planning and sustainable management of pension funds to navigate the fiscal challenges that lie ahead. As the pension burden continues to grow, state governments face the imperative to adopt prudent financial measures to ensure long-term fiscal stability and viability.

Status Update on Old Pension Scheme (OPS) Implementation Across Five States


  • Current Status: OPS is conditionally applicable post-refund of withdrawn amounts.
  • Development: After 2022, over 600 NPS-affiliated retired employees receive 50% of their last pay as pension. However, a substantial number of employees have withdrawn from NPS for various purposes, and the government insists on depositing these amounts before OPS eligibility.
  • Overall Status: Applicable but subject to conditions, not universally implemented.


  • Current Status: OPS announced in 2018, but no beneficiaries yet.
  • Development: The government asserts that Rs 17,240 crore of state employees’ pension fund contributions has been deposited in NSDL via PFRDA. OPS implementation is contingent on the center’s reimbursement.
  • Overall Status: Conditionally placed, not yet implemented.

Himachal Pradesh:

  • Current Status: OPS implemented as promised by the Congress government in December 2022.
  • Development: Approximately 550 retired employees are currently receiving 50% of their last salary as pension. A budget provision of 1000 crores has been allocated for pension disbursements.
  • Overall Status: Successfully implemented, currently applicable.


  • Current Status: OPS not yet implemented.
  • Development: The Soren government stipulates a condition requiring the refund of amounts deposited in NPS since 2004 for retired employees post-2022 before OPS pension eligibility.
  • Overall Status: Not yet implemented.


  • Current Status: OPS promised by the Aam Aadmi Party after coming to power in March 2022.
  • Development: Despite published advertisements, no individuals have benefited from OPS, and pensions continue to be paid through NPS.
  • Overall Status: OPS not currently applicable.

Government Accountability in Addressing Old Pension Scheme (OPS) Demands Amidst Growing Protests

Employees’ organizations across several states are intensifying their demand for the reinstatement of the Old Pension Scheme (OPS), garnering support from opposition groups. Noteworthy instances of agitation include an ongoing strike in Punjab since November 8 and warnings of potential unrest from employees in Maharashtra.

Further adding to the pressure, prominent employee unions, including the Joint Forum of Railways (JFR) and the UP Collectorate Sangh, are actively participating in agitation efforts. The resonance of these demands is significant, especially with the Lok Sabha elections on the horizon, as the opposition group also throws its weight behind the call for OPS reinstatement.

In light of the widespread agitation and mounting concerns among employees, the responsibility of the government in addressing the OPS matter becomes crucial. The government must engage in transparent dialogue with employee representatives, considering the broader implications of their demands. Striking a balance between fiscal prudence and addressing the legitimate concerns of employees is imperative to mitigate unrest and uphold the welfare of the workforce. As the situation evolves, the government’s responsiveness and commitment to a constructive resolution will play a pivotal role in determining the trajectory of OPS-related developments.

Additionally, it is essential to recognize the fundamental distinctions between the Old Pension Scheme (OPS) and the New Pension Scheme (NPS).

OPS operates as a Defined Benefit (DB) scheme, ensuring that retired employees receive a fixed percentage, specifically 50%, of their last salary as a pension. The financial responsibility for OPS lies with the government, which covers pension disbursements using its own revenue.

In contrast, NPS functions as a Defined Contribution (DC) scheme. Under NPS, the pension amount is contingent upon the market performance and volatility of the pension fund. This implies that the final pension outcome for NPS participants is subject to market fluctuations, introducing an element of uncertainty into the pension calculation. Unlike OPS, where the government assumes responsibility for pension payments, NPS places the onus on individual contributors and their pension fund investments to determine the eventual pension amount based on market conditions.

Akash Shrivastav

My name is Akash Shrivastav, and I am a Blogger. I have 8 years of experience in blogging for Finance, Business, Investment, Stock Market, Cryptocurreny and more. Through my writing, I aim to provide readers with insightful and informative content.