OPS vs NPS: 'Think through long-term implications', Raghuram Rajan's advice to states restoring old pension scheme

OPS vs NPS: Former RBI Governor Raghuram Rajan has expressed concerns over the decision of several states to restore the old pension scheme. He said that OPS involves massive future outlays because of the indexation of pensions to current salaries.

Rajan suggested that states should find less costly ways to address the demands of government pensioners."This is an enormous obligation, not necessarily in the short run, but in the long run," he said.

He added that states have to think through the long-term implications for government finances.OPS was replaced by National Pension System (NPS) in 2003 with effect from April 1, 2004.In a major move, a select group of central government employees have been given a one-time option to opt for old pension scheme.

The employees who joined the central government services against posts advertised or notified before December 22, 2003, the day National Pension System (NPS) was notified, are eligible to join the old pension scheme under the Central Civil Services (Pension) Rules, 1972 (now 2021).

Also read- 5 tax saving options other than 80C  

Under Old Pension Scheme (OPS), employees get a defined pension. An employee is entitled for a 50 per cent amount of the last drawn salary as pension.Several states, especially Congress-ruled (Rajasthan, Chhattisgarh and Jharkhand), have already restored the OPS and scrapped the NPS. The government of Punjab on November 18, 2022, issued a notification regarding implementation of OPS for the state government employees who are being covered under NPS.

Under the NPS, employees contribute 10 per cent of their basic salary towards pension while the government contributes 14 per cent.\

Also read- Income tax return filing: What is ITR 1 Sahaj form? Check eligibility and steps to file online