Old Pension Scheme: Centre Cites Unsustainable Fiscal Liability, No Proposal Under Consideration To Return To OPS

The question of reverting to the Old Pension Scheme (OPS) has been raised several times, and the government has repeatedly clarified that it has no proposal under consideration in this regard. During this Monsoon Session of Parliament, Parliamentarian Indra Hang Subba asked the question again, to which the Minister of State for Finance Pankaj Chaudhary clarified the government’s stance, saying that restoration of the OPS will create an “Unsustainable fiscal liability” on the national exchequer, and that the government is not considering any such proposal.

In his written reply on August 10, 2026, the minister further clarified that while a few state governments have expressed a desire to revert to the OPS, their accumulated pension contribution cannot be refunded.

He said in his reply: “There is no provision under the PFRDA Act, 2013, read along with the PFRDA (Exits and Withdrawals under the National Pension System) Regulations, 2015 and other relevant Regulations, vide which the accumulated corpus of the subscribers viz Government contribution, Employees' contribution towards NPS along with accruals, can be refunded and deposited back to the State Government.”

Since the National Pension System (NPS) replaced the OPS in 2004, state governments had adopted the NPS, but a few states have reverted to the OPS in the following years. However, during this period, they (employees and the government) had been contributing to the NPS, and this accumulated NPS corpus (both government and employee contributions plus accruals) is not allowed to be transferred to the state governments, according to the Pension Fund Regulatory and Development Authority (PFRDA) rules.

While the Centre has remained firm on not reverting to the OPS, it has become a point of friction between states and the Centre. Chaudhary confirmed that the governments of Rajasthan, Chhattisgarh, Jharkhand, Punjab, and Himachal Pradesh have officially informed the Centre and PFRDA of their decision to revert to the OPS.

As the OPS is a non-contributory scheme, it creates a fiscal burden on the government. When last year, the same question was asked about the government’s plan to revert to the OPS, Union Minister of Finance Nirmala Sitharaman highlighted the same issue—unsustainable fiscal liability. In her written reply dated August 11, 2025, she answered, “The Government had moved away from OPS due to its unsustainable fiscal liability on the Government exchequer”.

To improve the pensioner benefits, the government had formed a Committee to suggest measures for modifying NPS, and based on the Committee’s recommendations, introduced the Unified Pension Scheme (UPS) as an alternative to NPS, to offer an assured pension unlike NPS, while maintaining the contributory nature of the scheme. UPS became effective from April 1, 2025.

UPS offers a minimum assured monthly pension of Rs 10,000 after retirement if the employee completed a minimum of 10 years of qualifying service. However, the scheme has seen a low uptake. According to a reply by Sitharaman on August 3, 2026, the total number of UPS subscribers, as of July 19, 2026, stood at 118,195.

According to a PTI report, the government’s refusal to restore OPS is a strategy to manage the national deficit. The fiscal deficit has reduced from 6.70 per cent of the gross domestic product (GDP) in 2021-22 to a provisional 4.40 per cent in 2025-26, and is projected to drop further to 4.30 per cent of the GDP according to the 2026-27 Budget Estimates. According to Chaudhary, the government is prioritising capital expenditure to push economic growth.