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Source: The post is based on the article “Select Central staff can opt for Old Pension Scheme” published in The Hindu on 4th March 2023.
What is the News?
The Central Government has given a select group of central government employees a one-time option to opt for the Old Pension Scheme(OPS).
Who is allowed to join the Old Pension Scheme(OPS)?
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.
The select group of government servants can opt for this option by August 31, 2023.
What is the Old Pension Scheme(OPS)?
Under OPS, pension to government employees at the Centre, as well as states, was fixed at 50 per cent of the last drawn basic pay.
Only government employees are eligible for receiving a pension after retirement.
Income under the old pension scheme doesn’t attract tax.
OPS was discontinued in 2003 with effect from April 1, 2004.
How is OPS different from New Pension Scheme(NPS)?
NPS is an easily accessible, low-cost, tax-efficient, flexible and portable retirement savings account.
Under the NPS, the individual contributes to his retirement account and his employer can also co-contribute to the social security/welfare of the individual.
NPS is designed on a defined contribution basis wherein the subscriber contributes to his account, there is no defined benefit that would be available at the time of exit from the system and the accumulated wealth depends on the contributions made and the income generated from investment of such wealth.
Simply put, under the old system, pension was fixed as 50% of the last basic salary drawn, along with other benefits. Hence, the benefit due was defined beforehand. However, in the case of the NPS, the pension benefit is determined by factors such as the amount of contribution made, the age of joining, the type of investment and the income drawn from that investment.
Moreover, residents as well as non-resident Indians in the age group of 18–60 years can invest in NPS.