New pension scheme vs old pension scheme: Here is all you need to know

The Indian government introduced a new pension scheme for its citizens, known as the National Pension System (NPS) in 2003 and came into effect in the following year. NPS aims to provide a defined contribution pension for the country’s citizens. The new scheme was launched as an alternative to the existing Old Pension Scheme (OPS) and aims to provide a more secure and stable retirement income for the country’s citizens. In this article, we will take a closer look at the differences between the NPS and OPS. 

The NPS is a defined contribution scheme that allows individuals to invest in a variety of pension funds. The scheme is open to all citizens of India between the ages of 18 and 60. Under the NPS, the government does not provide any guaranteed pension. Instead, the pension received is based on the investment returns generated by the pension funds. The scheme also provides for a life insurance cover of Rs.5 lakh for the subscriber.

The OPS, on the other hand, is a defined benefit scheme that provides a pension based on the individual’s last drawn salary and the number of years of service. The scheme is open to government employees who have completed at least 10 years of service. Under the OPS, the government provides a guaranteed pension that is based on the individual’s last drawn salary and the number of years of service.

One of the key differences between the NPS and OPS is the level of guaranteed pension provided. The NPS does not provide any guaranteed pension, whereas the OPS provides a guaranteed pension based on the individual’s last drawn salary and the number of years of service. This makes the OPS a more secure and stable option for those looking for a guaranteed pension in their retirement.

Another important difference between the two schemes is the age limit. The NPS is open to citizens between the ages of 18 and 60, while the OPS is open to government employees who have completed at least 10 years of service. This makes the OPS a more suitable option for government employees looking to plan for their retirement.

In terms of contribution, the NPS is more flexible than the OPS. Under the NPS, the individual can choose to invest in a variety of pension funds, while under the OPS, the pension is based on the individual’s last drawn salary and the number of years of service.

FAQs:

Q1. What is the National Pension System (NPS)?

The National Pension System (NPS) is a defined contribution pension scheme launched by the Government of India for the citizens of the country. It is open to all citizens of India between the ages of 18 and 60 and it allows individuals to invest in a variety of pension funds.

Q2. What is the Old Pension Scheme (OPS)?

The Old Pension Scheme (OPS) is a defined benefit pension scheme for government employees who have completed at least 10 years of service. It provides a guaranteed pension based on the individual’s last drawn salary and the number of years of service.

Latest Business News