Sen said the OPS, a non-contributory and unfunded system, was fiscally unsustainable, leading to the introduction of the contributory NPS in 2004.
“The old pension system was an unfunded, uncontributed, defined benefit system where you paid as you went. So as pension liabilities built up each year, we used to pay out of the budget.
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“It was not fiscally sustainable and the fact that it was not sustainable was understood a long time ago, two decades ago, and so we moved to a defined contribution scheme which was the National Pension Scheme which started on January 1, 2004,” he said.
Sen noted that UPS retains key features of the NPS, including its contributory nature and fully funded structure, ensuring fiscal prudence and intergenerational equity. The scheme addresses key employee concerns, offering assured, family and minimum pensions, and inflation indexation.
“Returning to the pension system is not a fiscally prudent or viable option, so it is not contemplated. We have also maintained a contributory regime and we will continue with this regime,” Sen said.
Read also: From NPS to UPS: Understanding the shift, expected changes, and other details
Responding to criticism that the OPS offered more guarantees without employee contributions, Sen said the OPS is not a viable option due to its financial imprudence, a global realization over the past two decades. The government sees the UPS as a balanced approach that meets employee needs while maintaining fiscal responsibility.
Sen also addressed concerns over the 25-year service clause under the Civil Service Pension System, noting that 97% of central government employees participating in the National Pension System would meet this criterion. He assured that there are proportional pensions for those with shorter periods of service, ensuring continued support for retirees.
The government hopes that opposition-ruled states will consider adopting the UPS system, though Sen acknowledged that the decision rests with each state. According to Sen, the UPS system offers a robust and financially sound architecture that could benefit both state and central government employees.
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The Union Cabinet has approved an assured pension of 50% of the salary for those who joined the service after January 1, 2004, under the National Pension System (SNP).
Employees opting for UPS would be eligible for an assured pension of 50% of the average basic salary earned during the last 12 months before retirement for a minimum qualifying service of 25 years.
This payment will be proportional to a shorter period of service up to a minimum of 10 years of service, Information and Broadcasting Minister Ashwini Vaishnaw said.
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