Recently, there’s been a lot of talk about a new scheme introduced by the Modi government called the Unified Pension Scheme (UPS). While economic experts worldwide have discussed its pros and cons, and how it will affect pensions and improve the future of young people, especially those in government jobs, the main question remains: Why did the Modi government, which has always rejected the Old Pension Scheme (OPS) as a burden on the treasury and praised the New Pension Scheme (NPS), suddenly introduce a new pension scheme right after the Lok Sabha elections? Is it because the BJP’s performance in the elections, where they won only 240 seats, is the main reason? Is the government trying to course-correct ahead of the upcoming state assembly elections, or is there something genuinely beneficial in this new pension scheme for the public, especially for government employees? And is it really unrelated to the burden on the government treasury? Today, we’ll discuss this in detail. I am Avinash, and you are reading this special presentation from ABP Uncut.
The new Unified Pension Scheme by the Modi government can be summarized in one line: It is a response to the BJP’s performance in the Lok Sabha elections and the upcoming state assembly elections. For the past 10 years, whenever the BJP has contested an election—whether it’s for the Lok Sabha or state assemblies like Uttar Pradesh, Madhya Pradesh, Rajasthan, Maharashtra, Chhattisgarh, Haryana, Himachal, and many others—the issue of Old Pension Scheme versus New Pension Scheme has always been present. The opposition also raises this issue whenever possible, and in states where they have the opportunity, opposing Chief Ministers have reinstated the Old Pension Scheme. In Himachal, the OPS even helped the Congress come to power, causing significant damage to the BJP both in Lok Sabha and state assembly elections. Therefore, the BJP wanted to implement the OPS too, but doing so would have given credit to the opposition, especially to leaders like Rahul Gandhi and Akhilesh Yadav, who have been the most vocal about the Old Pension Scheme.
So, the BJP had to make a course correction by introducing a policy that resembles the old one but is still new, so that no opposition leader can take credit for it. Hence, instead of the Old Pension Scheme or the New Pension Scheme, the government has introduced the Unified Pension Scheme, which combines elements of both. Let’s understand how it works.
The Old Pension Scheme was a guaranteed pension scheme, meaning pensions were assured, which put a burden on the government. This was why the government wasn’t implementing it. On the other hand, the New Pension Scheme determined pensions based on market returns, meaning the government invested the employee’s money in the market, and the pension depended on the returns. The downside was that there was no guarantee of market returns, leading to employee opposition. The Unified Pension Scheme combines both. First, there’s a guarantee that if someone has worked for 10 years, they will receive at least ₹10,000 per month. If someone has worked for 25 years, they will receive 50% of their last year’s average basic salary as a pension. This guarantees a pension, incorporating an element of the Old Pension Scheme.
As for the New Pension Scheme, under the Unified Pension Scheme, the government will contribute 18.5% of the basic salary and DA, while the employee will contribute 10%. This money will be invested in the market, and the returns will be used to pay the pension. If the market returns are insufficient, the government will still guarantee the pension, even if it means using its own funds.
So, you see, it’s a mix of the Old Pension Scheme and the New Pension Scheme, resulting in the Unified Pension Scheme. Now, the question is whether the Unified Pension Scheme will increase the burden on the government treasury, given that the Old Pension Scheme was rejected due to this burden. The answer is yes, the Unified Pension Scheme will also increase the burden on the treasury. The only relief might come if the market performs well and returns are good, reducing the burden. But if the market falters, the government will have to open its treasury to pay pensions.
When this scheme is implemented in the financial year 2025-26, the central government will need to allocate at least ₹6,250 crores. After all, the scheme affects 23 lakh central government employees and 27 lakh state government employees, meaning nearly one crore voters. To attract so many voters, such an expenditure is justified. States that adopt the Unified Pension Scheme will also need to arrange funds. If all state government employees are included, the number of affected employees could reach around 90 lakhs, which translates to about 3.5 crore voters.
The introduction of the Unified Pension Scheme may put an end to the political debate over the Old Pension Scheme. After all, the new scheme has not only tackled the politics surrounding pensions but also taken away a significant election issue from the opposition leaders. Now you should have a better understanding of the benefits and drawbacks of this new scheme. That’s all for now. We’ll meet again with new updates, ABP Uncut.
