The Government of India launched a new pension scheme for its citizens in 2003, known as the National Pension System (NPS) and came into force the following year. The objective of NPS is to provide defined contribution pension to the citizens of the country. The new scheme was launched as an alternative to the existing Old Pension Scheme (OPS) and aims to provide a more secure and stable retirement income for the citizens of the country. In this article, we will take a closer look at the differences between NPS and OPS.
NPS is a defined contribution plan that allows individuals to invest in various types of pension funds. The scheme is open to all citizens of India between the age of 18 to 60 years. Under NPS, the government does not provide any guaranteed pension. Instead, the pension received is based on the investment returns generated by the pension fund. The plan also provides a life insurance cover of Rs 5 lakh for the subscriber.
On the other hand, OPS is a defined benefit scheme that provides pension based on the last drawn pay and number of years of service of the individual. The scheme is open to government employees who have completed at least 10 years of service. Under OPS, the government provides a guaranteed pension which is based on the last drawn pay and number of years of service of the individual.
The major difference between NPS and OPS is the level of guaranteed pension provided. NPS does not provide any guaranteed pension, while OPS provides guaranteed pension based on the last drawn salary and number of years of service of the individual. This makes OPS a more secure and stable option for those looking for a guaranteed pension in their retirement.
Another important difference between the two schemes is the age limit. NPS is open to citizens between 18 and 60 years of age, while OPS is open to government employees who have completed at least 10 years of service. This makes OPS a more suitable option for government employees who want to plan for their retirement.
In terms of contribution, NPS is more flexible than OPS. Under NPS, one can choose to invest in different types of pension funds, whereas, under OPS, the pension is based on the last drawn salary and number of years of service of the individual.
frequently Asked question:
Q1. What is National Pension System (NPS)?
National Pension System (NPS) is a defined contribution pension scheme launched by the Government of India for the citizens of the country. It is open to all citizens of India between the age of 18 to 60 years and it allows individuals to invest in various types of pension funds.
Q2. What is Old Pension Scheme (OPS)?
Old Pension Scheme (OPS) is a defined benefit pension scheme for government employees who have completed at least 10 years of service. It provides guaranteed pension based on the last drawn pay and number of years of service of the individual.