New pension scheme vs old pension scheme: Several states are returning to the old pension scheme. The Punjab government recently announced that they are planning about going back to OPS for its employees. Punjab will become the fourth state to switch back to the OPS if the idea were to pass. The old pension scheme is already in place in states like Rajasthan, Chhattisgarh, and Jharkhand.
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Punjab Government: Return of Old Pension Scheme for its Employees
The old pension scheme was ended by the NDA government in December 2003. The new pension scheme came into effect on April 1, 2004.
State of Chhattisgarh to reinstate an old pension scheme
New Pension Scheme | Old Pension Scheme |
Old Pension Scheme (OPS) provides return certainty by basing the monthly pension on the last wage received by the employee. | New Pension Scheme (NPS) creates market-linked returns without any guarantee of returns. |
Old Pension Scheme (OPS) income is not a subject to the taxation system. | The New Pension Scheme (NPS) gives a retirement pension fund that is 60% tax-free upon redemption while the remaining is 40%, which has to be invested in annuities that are 100% taxable. |
Old Pension Scheme may be able to force governments to reevaluate their economic objectives. | New Pension Scheme was designed to relieve this necessity of economic objectives. |
Monthly payment under OPS is made that is equivalent to 50% of the last salary drawn. | Employees that participate in New Pension Scheme pay a monthly amount equal to 10% of their salaries |
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