8th Pay Commission: Employees’ Body Seeks Reversion To OPS, Additional 5 Per Cent Pension Every Five Years

The 8th Central Pay Commission (CPC) is holding discussions with various employee unions, pensioner bodies, and other stakeholders these days. This time, the Commission is collecting responses from the stakeholders, and the focus is not merely on the fitment factor and hike in dearness allowance (DA). The Commission is weighing proposals that could redefine financial security for over 1.10 billion central government employees and pensioners. 

One of the notable components of the discussion involves the base calculation for monthly payouts. At present, pensions are fixed at 50 per cent of the last drawn salary. However, the National Council-Joint Consultative Machinery (NC-JCM) (Staff Side) in its memorandum has demanded that the pension should be 67 per cent of the last pay drawn (LPD). In its memorandum, NC-JCM argued that the current pension is not sufficient for a two-member family to live with a decent standard of living.

Monthly Payouts Calculation

The Council proposed that the pension should either be fixed at 67 per cent of the LPD or the average of the last 10 months’ emoluments, whichever is beneficial to the employee. The memorandum also mentions the Parliamentary Standing Committee’s recommendation, which suggested an increase in pension benefits to incorporate the rising cost of living and healthcare in retirement years.  

Age-Based Pension Structure

One of the most striking recommendations it made is to introduce an age-based pension structure. Under this framework, it is suggested that the pension should not remain static; it should increase every five years after the age of 65 years. According to the proposed structure, the pension should be 70 per cent of the LPD at age 65, 75 per cent at age 70, 80 per cent at age 75, and so on till it reaches 100 per cent at age 90. 

According to the proposal, this age-based model would provide a stronger safety net for the old-age pensioners.    

Other Demands

In addition to this, the Council also proposed to extend the leave travel allowance (LTA) and house rent allowance (HRA) to pensioners. It also proposed to provide a caretaker allowance based on medical needs, exempt pensioners and family pensioners from income tax, restore railway concession for senior citizens, establish senior-friendly holiday homes and hostels, and provide mobility allowance, among other demands.

Reversion To Old Pension Scheme

While the employees’ bodies have sought a reversal to the non-contributory Old Pension Scheme (OPS), due to uncertain social security under the National Pension System (NPS), it added that only 4.50 per cent of the around 2.60 million NPS employees have opted for the Unified Pension Scheme (UPS) implemented in 2025. As such, there is no point in continuing with these two pension schemes, it said.

However, both the Reserve Bank of India (RBI) and the Comptroller and Auditor General (CAG) have suggested in separate reports that reverting to the OPS will not be useful in the long term.

According to the RBI’s report titled “State Finance: A Study of Budgets of 2022-23”, annual savings by reverting to the OPS are short-lived. “By postponing the current expenses to the future, states risk the accumulation of unfunded pension liabilities in the coming years,” the report said.

According to other media reports, the 8th Pay Commission is exploring pension flexibility instead of a single mandatory scheme for the employees. It may include features from OPS, NPS, and UPS, with assured pension, a contributory nature, and switching options to benefit from market performance, among others.  

The Commission is required to submit its recommendations to the government by mid-2027, post which, the government will review them, and then revise or accept the recommendations, which would be applicable for the next 10 years.