‘Almost OPS’: Modi govt’s ‘UPS’ bet on pension debate, bringing huge wealth to employees

In a major decision to almost go back to the old pension scheme (OPS) that existed till 2003, the Modi government launched the Unified Pension Scheme (UPS) to meet the major needs of central employees.

The New Pension Scheme was introduced in 2003 by the then Atal Bihari Vajpayee government, replacing the OPS. Both the Manmohan Singh and Modi governments followed this approach until last year when a committee was set up to look into the growing demands of various employee unions. The Congress party made the restoration of OPS a centerpiece of its state election campaign but made no mention of it in its manifesto for the 2024 Lok Sabha polls.

The union cabinet on Saturday approved the Unified Pension Scheme, saying “UPS's structure has elements of both OPS and NPS, removes market uncertainty and provides assurance.” UPS restores guaranteed retirement equal to 50% of basic salary payment, plus an inflation-indexed fee reduction. Additionally, every central government employee who has retired since 2004 will receive UPS benefits with retrospective effect and their outstanding balances will be paid.

All employees will have the option to switch to UPS from April 1, 2025, due to the incentives on offer and what the government itself calls an “attractive scheme”. UPS will have a financial impact, which was the logic of the Vajpayee government in abolishing OPS in 2003 because of the huge pension burden on government employees. The Agnipath scheme launched by the government for the armed forces has also led to a reduction in the financial pension burden.

political influence

The Congress will see this as another U-turn by the Modi government after the 2024 Lok Sabha election results, as many BJP officials have said that returning to OPS will mean huge fiscal cuts. Union minister Ashwini Vaishnaw, however, said many Congress experts (indirectly referring to P Chidambaram and Montek Singh Ahluwalia) were also not in favor of returning to OPS and the party was divided on the issue.

But the PPP government has also recently scrapped plans for lateral entry into the bureaucracy and said reservations will be included in the future, referred the waqf bill to a joint parliamentary committee under pressure from the opposition and its allies, and withdrew the draft broadcasting bill, which has also come under pressure from the opposition and its allies. criticize. Modi's government is moving quickly ahead of crucial state elections in Haryana, Maharashtra, J&K and Jharkhand and next year's Delhi polls.

Vishno, however, said UPS's move had “nothing to do with elections” while responding to a question whether the Election Commission of India had been approached for consent before taking the decision as the model code of conduct has been implemented in two states. To be clear, the Center's decision affects only 23 lakh central government employees, but state governments can now also continue using UPS, but at a cost. The Congress governments in Himachal Pradesh and Rajasthan have announced a return to OPS.

Govt calls out Modi's actions

The government said Prime Minister Narendra Modi took the approach of forming a committee, conducting extensive consultations and taking “well-thought-out decisions”. The report also said that during Prime Minister Modi's administration, government contributions under the scheme were increased by 10% to 14% for the first time and have now been increased to 18.5%. The government says UPS will be a contributory-funded scheme. In addition to a guaranteed pension indexed for inflation, UPS also offers a lump sum pension equal to 10% of salary plus DA for every six months of employment.

UPS will also grant a family pension equal to 60% of the pension before death. After at least 10 years of service, a guaranteed pension of Rs 10,000 per month will be provided.