Old Pension Scheme (OPS)
The Old Pension Scheme (OPS) is a government-sponsored pension plan that was prevalent in India until 2004. It was a defined benefit scheme, meaning that employees were guaranteed a fixed pension upon retirement based on their last drawn salary and length of service.
Key Features of OPS:
- Defined Benefit: The pension amount was pre-determined based on a formula.
- Government Liability: The government was solely responsible for funding and managing the pension scheme.
- Retirement Benefits: Employees received a monthly pension for life after retirement.
Reasons for the Shift to NPS:
- Financial Burden: The OPS became a significant financial burden on the government due to increasing life expectancy and rising pension costs.
- Lack of Flexibility: The OPS did not offer much flexibility in terms of investment options or portability.
- Need for a Sustainable Pension System: The government recognized the need for a more sustainable and flexible pension system.
NPS vs. OPS:
| Feature | NPS | OPS |
|---|---|---|
| Type | Defined Contribution | Defined Benefit |
| Investment Options | Flexible | Fixed |
| Government Liability | Minimal | Significant |
| Retirement Benefits | Based on accumulated contributions | Pre-determined |
Note: While OPS has been discontinued for new government employees, existing employees who were part of the scheme before 2004 continue to receive benefits under OPS.