Planning for retirement is one of the most important financial decisions. India offers different pension schemes for government employees and citizens to ensure financial security in their post-retirement years. The main pension schemes are the Unified Pension Scheme (UPS), National Pension System (NPS), and the Old Pension Scheme (OPS). In this blog, we will compare these schemes and explain their features, eligibility, benefits, and differences in a simple way.
What is the Unified Pension Scheme (UPS)?
The Unified Pension Scheme (UPS) is a new option under the National Pension System (NPS), introduced by the Central Government for its employees. UPS ensures a guaranteed monthly payout after retirement.
- Operational From: 1st April 2025
- Eligibility: Central Government employees covered under NPS
- Payout: 50% of the 12-month average basic pay at the time of retirement (full payout after 25 years of service)
- Minimum Assured Payout: Rs. 10,000 per month (after 10 years of qualifying service)
- Family Pension: 60% of the retiree’s payout is given to the legally wedded spouse after death
- Contributions: Employee contributes 10% of basic pay + DA, matched by the government. Additionally, the government contributes 8.5% of the total pay to support UPS payouts.
- Inflation Protection: Dearness Relief (DR) is provided like it is for serving employees
- Additional Benefits: Lump sum payment at retirement = 10% of monthly emoluments for every completed six months of service
UPS is a fund-based assured pension system, meaning your payouts depend on contributions, investments, and the benchmark corpus.
What is the National Pension System (NPS)?
The National Pension System (NPS) is a market-linked, defined-contribution scheme regulated by the Pension Fund Regulatory and Development Authority (PFRDA). It is designed to help citizens and employees save for retirement in a disciplined way.
- Eligibility:
- Mandatory for Central Government employees joining after Jan 1, 2004
- Voluntary for all Indian citizens, including those abroad, aged 18-70
- Can also be adopted by corporates for employees
- Key Features:
- Permanent Retirement Account Number (PRAN): Unique ID for life
- Investment Options: Equity, corporate bonds, government securities
- Voluntary & Flexible: Subscribers can choose fund managers and investment options
- Portability: Can be carried across jobs and locations
- Retirement Benefits:
- At least 40% of the accumulated corpus must be used to buy an annuity for a monthly pension
- Remaining corpus can be withdrawn as lump sum
- Tax Benefits: Contributions eligible under sections 80C and 80CCD of Income Tax Act
- Optional Accounts: NPS Vatsalya for minors and special provisions for OCIs
NPS is market-linked, meaning returns depend on fund performance, unlike UPS or OPS.
What is the Old Pension Scheme (OPS)?
The Old Pension Scheme (OPS) was the pension system in India before 2004. It is fully government-funded and provides fixed monthly pensions.
- Eligibility: Government employees who joined service before 2004
- Key Features:
- Fixed Pension: 50% of last drawn basic pay
- Dearness Allowance (DA): Pension increases with DA hikes
- No Employee Contribution: Fully funded by the government
- Family Pension: Provided after the retiree’s death
- Gratuity: Lump sum at retirement
- Status: Discontinued for employees joining after 2004
- Political Discussions: Some states are considering restoring OPS
- Options under NPS: Certain NPS subscribers may choose OPS benefits in limited cases
OPS provides financial security with guaranteed pension, but it is less flexible compared to NPS or UPS.
Key Differences Between OPS, NPS, and UPS
The details of the key differences between these 3 schemes are as follows:
| Feature | OPS | NPS | UPS/APY |
| Launch Year | Pre-2004 | 2004 | 2015 |
| Eligibility | Govt employees before 2004 | Govt & private employees | Self-employed/unorganised sector |
| Pension Type | Fixed | Market-linked | Fixed (₹1,000–₹5,000) |
| Contribution | Govt only | Employee ± Employer | Subscriber ± Govt |
| Transferable | No | No | No |
| Flexibility | None | High (investment choice) | Low |
| Risk | Low | Moderate | Low |
How is UPS different from NPS and OPS?
The details about how the UPS pension scheme is different from NPS and OPS scheme.
| Feature | UPS | NPS | OPS |
| Type | Fund-based, assured payout | Market-linked, defined contribution | Government-funded, fixed pension |
| Eligibility | Central Govt employees under NPS | All Indian citizens 18-70, mandatory for some employees | Employees before 2004 |
| Payout | 50% of last 12-month average basic pay (assured) | Depends on corpus & annuity (market-linked) | 50% of last drawn basic pay (fixed) |
| Minimum Pension | Rs. 10,000 per month | No fixed minimum | 50% of basic pay |
| Contributions | Employee + Govt + additional govt contribution | Employee + optional employer contribution | No employee contribution, fully govt-funded |
| Inflation Protection | Dearness Relief applicable | Depends on annuity | DA hikes applicable |
| Family Pension | 60% of payout to spouse | Depends on annuity chosen | Provided |
Can OPS Be Transferred to NPS or Vice Versa?
Employees under the Old Pension Scheme (OPS) cannot directly transfer their pension to the National Pension System (NPS); they will continue to remain under OPS throughout their service. Similarly, switching from NPS to OPS is not permitted, as OPS is closed for new entrants and only NPS is available for employees joining after 2004.
For individuals enrolled in the Unorganised Pension Scheme (UPS) or Atal Pension Yojana (APY), transfer to either OPS or NPS is also not allowed, since these schemes are specifically designed for self-employed and unorganised sector workers and operate independently of the government employee pension systems.
Note* – Central government employees under the Unified Pension Scheme (UPS) can switch back to the National Pension System (NPS) only once, before 30th September, 2025. Eligibility requires a clean service record, and the switch must be made at least one year before retirement or three months before voluntary retirement. The choice is final and irreversible.
Which scheme is best?
Choosing the right pension scheme is important for a secure and comfortable retirement. Each scheme OPS, NPS, or UPS has its own benefits and is suitable for different types of employees.
- UPS: Best for assured pension with government support and a guaranteed minimum payout. Suitable for Central Government employees seeking stability.
- NPS: Best for flexible, market-linked retirement savings with potential for higher returns. Ideal for those who want investment growth.
- OPS: Best for employees who want fully guaranteed pension with no contributions. However, only for pre-2004 employees or in limited restoration scenarios.
Who Should Choose Which Scheme?
The details of each pension scheme and guidance on who should choose which one are as follows:
| Scheme | Ideal For | Pension Type | Contribution | Risk |
| OPS | Pre-2004 government employees | Fixed (50% of last basic salary) | Govt-funded | Low |
| NPS | New government & private sector employees | Market-linked (depends on investment) | Employee & employer | Moderate |
| UPS/APY | Unorganised sector/self-employed | Fixed monthly | Subscriber + Govt co-contribution | Low |
Choosing the right pension scheme depends on your risk appetite, retirement goals, and employment category.
- UPS provides security with assured payouts and is suitable for government employees.
- NPS offers growth potential and flexibility with market-linked returns.
- OPS provides guaranteed pensions but is mostly historical and limited to pre-2004 employees.
Understanding these differences will help employees and citizens make an informed retirement planning decision.
Check: Details of All Government Schemes
Key Takeaways
| Aspect | OPS | NPS | UPS/APY |
| Launch Year | Pre-2004 | 2004 | 2015 |
| Target Group | Pre-2004 govt employees | Govt & private employees | Self-employed/unorganised sector |
| Pension Type | Fixed (50% of last salary) | Market-linked | Fixed (₹1,000–₹5,000) |
| Contribution | Government | Employee ± Employer | Subscriber ± Govt |
| Investment Risk | Low | Moderate | Low |
| Transferable | No | No | No |
| Retirement Age | 60+ | 60 | 60 |
| Tax Benefit | Standard govt rules | Tax exemption under 80C & 80CCD(1B) | Tax benefit under 80CCD(1) |
FAQs
No, OPS is only for employees who joined before 2004.
No, NPS pension depends on market performance.
Yes, based on age and contribution capacity, before a certain age.
No, government contribution is only for central government employees.
No, schemes are independent and not transferable.
- Pradhan Mantri Dhan Dhaanya Krishi Yojana Features, Objectives, and Benefits
- [Video] What is Pradhan Mantri Dhan Dhanya Krishi Yojana?
- Pradhan Mantri Matsya Kisan Samridhi Sah-Yojana Features, Objectives
- What is Kishore Vaigyanik Protsahan Yojana, Features, Objectives
- Mahila Samman Saving Certificate Scheme Features, Objectives
- Important Days in September 2025, Check Important Dates
Hi, I’m Aditi. I work as a Content Writer at Oliveboard, where I have been simplifying exam-related content for the past 4 years. I create clear and easy-to-understand guides for JAIIB, CAIIB, and UGC exams. My work includes breaking down notifications, admit cards, and exam updates, as well as preparing study plans and subject-wise strategies.
My goal is to support working professionals in managing their exam preparation alongside a full-time job and to help them achieve career growth in the banking sector.