Differences between Old Pension Scheme and New Pension Scheme

Old Pension Scheme and New Pension Scheme are two different schemes and we will learn about the differences between Old Pension Scheme and New Pension Scheme here.

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.

Differences between Old Pension Scheme and 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.

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


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.

Source: https://www.jagranjosh.com/general-knowledge/differences-between-old-pension-scheme-and-new-pension-scheme-1663933333-1

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