Old pension scheme (OPS)

Old pension scheme (OPS)

Context:

• Recently, Maharashtra Cabinet announced a proposal of offering the option of availing benefits of the old pension scheme (OPS) to State government employees who joined the service after November 2005 based on the recruitment ads issued before that date.
• Such government officers and employees are being given a one­time option to implement provisions of the Maharashtra Civil Service Pension Rules, 1982, Maharashtra Civil Service Pension Rules, 1984, and General Provident Fund and Ancillary Rules on the lines of the Central government.

About Old Pension Scheme:

• The old pension scheme is for both state and central government employees who have completed 10 or more years of their service.
• The amount of pension is based on the last drawn salary and dearness allowance or on the average of both, whichever benefits the pensioners.
• Under this scheme, the government bears all the costs or the pension amount.
• The employees don’t contribute to the pension fund.
• The employee has no any type of income tax benefit, but the pension amount is tax-exempt.
• The pension and dearness allowance (DA) is revised by the government every half yearly, based on their salary plus DA.
• OPS is still available for some state government employees who joined their service before December 31, 2003.
• Those employees can apply for a pension through the official government portal or through any designated office. 

National Pension Scheme (NPS):

• NPS was universal in nature as it was introduced for everyone.
• It can be availed by self-employed, government employees, and organized and unorganized sector workers.
• It was an alternative to OPS and is a voluntary scheme.
• It was administered by the Pension Fund Regulatory and Development Authority.
• NPS is a market-linked pension scheme which removes some of the government’s payment burden as the market gains are added to the final corpus.
• In NPS contributions, the employee also makes the investment decisions and receives tax benefits.
• Under Section 80C, deductions up to Rs 1.5 lakh in a financial year are allowed in NPS and up to Rs. 50,000 under 80CCD (1b) of the Income-tax Act.
• The employees of the unorganized sectors can invest Rs 500 per month towards NPS.
• Up to 60 percent of the fund in a lump sum is available for withdrawal at retirement and the rest 40 percent to buy an annuity plan.
• The remaining 40 percent of the retirement fund must be re-invested in a pension scheme.
• The lump sum can also be withdrawn through a plan known as systematic withdrawal plan (SWP).

About PFRDA:

• The Pension Fund Regulatory and Development Authority (PFRDA) is the apex regulatory body for the overall supervision and regulation of pensions in India.
• PFRDA operates under the jurisdiction of Ministry of Finance in the Government of India.
• Based on the recommendations of the Indian government OASIS report, PFRDA was established in 2003.
• It was also the part of the establishment of the Indian National Pension Scheme.