Guaranteed Pension System (GPS) vs Old Pension Scheme (OPS): Which pension scheme offers maximum retirement benefits?

At a time when government employees have been demanding the reintroduction of the Old Pension Scheme (OPS) across multiple states, the Andhra Pradesh Assembly has passed the AP Guaranteed Pension Scheme (GPS). The AP Guaranteed Pension Scheme bill was passed in the Assembly on Wednesday, which will now bring all the state government employees under the Contributory Pension System (CPS) replacing the Old Pension System (OPS).

The decision was taken in the wake of long impending demands by employees to review the contributory pension scheme and examine the demand for restoring OPS.  

Let us evaluate the pros and cons of the Old Pension System and the Guaranteed Pension System to understand which one of the two offers the maximum retirement benefits. 

Guaranteed Pension Scheme: Features

- Employees will be entitled to receive a guaranteed fixed pension at 50 per cent of their last drawn salary. 

- There is an addition of dearness relief (DR) which will be announced twice a year and will increase the quantum of pension.

- The scheme will ensure a monthly spouse pension at the rate of 60 per cent of the guaranteed pension amount after the death of the pensioner. A retired government employee will get a minimum Rs 10,000 monthly pension.

- The scheme will combine elements of both the new and the old pension schemes. 

- Those dismissed or removed from service and facing compulsory retirement due to disciplinary action will not be eligible under the scheme. 

Old Pension Scheme: Features

- Employees are entitled to receive pension equivalent to 50 per cent of their last drawn salary.

- The scheme assures a post-retirement income for life.

-  The entire pension amount is paid by the government to employees after retirement and no contribution is made from salary during service period.

Guaranteed Pension System (GPS) vs Old Pension Scheme (OPS): Which one is better?

While the old scheme is typically offered to government employees, the New Pension System (NPS) was made available for all citizens between 18 and 60 years of age in 2009. The Guaranteed Pension Scheme law of the Andhra Pradesh government will ensure pension under the NPS.

Currently NPS investment offers 9 to 12 per cent return per annum along with tax benefits. However, in this case the government employees will have to make a contribution every month based on their basic salary and dearness allowance. Under OPS there was no need of any contribution by the government employees.