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1. What is NPS?
Answer:
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NPS stands for National Pension System.
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It started on 1 January 2004 for new central government employees.
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It is a contributory pension scheme where both employee and government contribute.
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The amount is invested in the market (equity, corporate bonds, government securities).
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At retirement, part of the amount can be taken as a lump sum, and the rest is used to purchase an annuity for monthly pension.
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Pension is not guaranteed because it depends on market performance.
2. What is OPS (Old Pension Scheme)?
Answer:
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OPS is the Old Pension Scheme, which existed before 2004.
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OPS gives a fixed and guaranteed pension, usually 50% of last drawn basic pay.
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Pension increases with Dearness Relief (DR) to cover inflation.
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Employees do not contribute from their salary.
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OPS was discontinued for new recruits from 1 January 2004 and replaced by NPS.
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OPS creates a heavy financial burden because the government pays the pension directly from its budget.
3. What is UPS (Unified Pension Scheme)?
Answer:
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UPS is the Unified Pension Scheme, introduced by the Government of India in August 2024.
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It will come into effect from 1 April 2025.
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UPS is offered to central government employees covered under NPS, giving them an option to shift.
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Key features:
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Assured pension: 50% of the average basic pay of the last 12 months, if service is 25 years or more.
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For 10–25 years of service, pension is proportionate.
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Minimum guaranteed pension: ₹10,000 per month for those with at least 10 years of service.
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Family pension: 60% of the employee’s pension to spouse.
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Inflation indexation: Pension will increase with inflation.
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Lump sum payment: A retirement lump sum is paid in addition to gratuity.
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Contribution: Employee contributes 10% and government contributes around 18.5%.
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4. What is PFRDA?
Answer:
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PFRDA stands for Pension Fund Regulatory & Development Authority.
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It was set up in 2003 as a temporary body, and became a statutory authority after the PFRDA Act was passed in 2013.
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It regulates and monitors pension funds in India, especially NPS.
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PFRDA ensures that pension funds are managed safely, transparently, and in the best interest of subscribers.
5. Why do employees want OPS?
Answer:
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OPS gives a fixed and guaranteed pension, removing financial uncertainty.
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Pension amount is predictable because it is linked to last drawn salary.
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Pension is protected against inflation through DR.
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Family pension is stable and easy to understand.
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No salary deduction for pension — employees receive higher take-home pay during service.
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Provides strong sense of financial security after retirement.
6. Why is the government not ready to bring back OPS?
Answer:
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OPS creates a very high long-term financial liability on the government.
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As life expectancy increases, pension payments continue for many more years.
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Pension under OPS is paid directly from government revenue, making it fiscally unsustainable.
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Restarting OPS would reduce funds available for development projects, infrastructure, welfare schemes, etc.
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Government prefers a shared-cost model like NPS or UPS.
7. How is NPS beneficial for employees?
Answer:
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Market-linked returns can grow the pension corpus more than fixed schemes.
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Regulated by PFRDA, making it transparent and secure.
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Pension account is portable across jobs and states.
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Offers tax benefits.
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Good for employees who want potentially higher returns and long-term investment growth.
8. How is UPS beneficial for employees?
Answer:
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Provides an assured pension, reducing uncertainty seen in NPS.
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Protects pension value with inflation indexation.
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Ensures minimum pension even for shorter service.
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Provides family pension, improving family security.
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Gives a retirement lump sum, helpful in planning.
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Tries to balance the benefits of OPS (security) and NPS (sustainability).
9. What are the downsides or risks?
Answer:
NPS risks:
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Pension is not guaranteed because investments depend on market performance.
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Annuity rates at retirement may be low.
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Limited liquidity before retirement.
UPS concerns:
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Employee continues contributing from salary, reducing take-home pay.
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Long-term sustainability depends on government finances.
OPS concerns (for government):
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Very heavy fiscal burden if reintroduced.
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Not financially sustainable for future generations.
