Difference between OPS and NPS: There have been speculations about the change in Pension Schemes, after three states Rajasthan, Chhattisgarh and Jharkhand have reverted back to the Old Pension Scheme and ditched the new pension scheme.
Now you might be wondering what are Old Pension Scheme and New Pension Scheme.
We will be covering all this information and also highlighting the difference between the old pension scheme and the new pension scheme.
What is the Old Pension Scheme or OPS?
Old Pension Scheme or OPS is a retirement scheme that is approved by the government. It provides a monthly pension to the beneficiaries till the end of their service life. The monthly pension is half of the last drawn salary of the individual.
What is New Pension Scheme or NPS?
NPS is another retirement scheme in which the beneficiaries will be able to withdraw 60% of the amount invested after retirement. It was introduced in the year 2004 by the Government of India.
The remaining 40% needs to be invested in annuities in order to receive a monthly pension.
Only Central government employees can switch back to the benefits of the Old Pension scheme in the event of death and disablement of the employee.
Let us look at some of the differences between the old pension system and the new pension system below.
Difference between Old Pension System and New Pension System
| Factors of Differentiation | Old Pension Scheme | New Pension Scheme |
| Nature | Old Pension Scheme offers pensions to government employees on the basis of their last drawn salary | New Pension Scheme pays the employees for their investments in the NPS Scheme during their employment. |
| How much percentage do employees get? | 50% of the last drawn salary as a pension | 60% lump sum after retirement and 40% to be invested in annuities for getting a monthly pension |
| Tax Benefits | No tax benefits | The employee can claim tax deductions of 1.5 lakh under Section 80C of income tax and up to 50,000 on other investments under 80CCD (1b) |
| Tax on Income | No tax on pension | 60% of the NPS Corpus is tax-free while the remaining 40% is taxable |
| Choice of Investing | No choice | Two choices: Active and Automatic |
| Who can avail? | Only government employees | Any Indian Citizen between 18-65 years. |
| Switching Schemes | OPS scheme can be switched to NPS | NPS scheme cannot be switched back to OPS in general, but central government employees can switch back to OPS in case of death and disablement of the employee. |
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