Old Pension Scheme: Not a Burden, But a Rightful Return of Deferred Wages
By Bharat Pensioners Samaj (BPS)
The Old Pension Scheme (OPS), applicable to central government employees who joined service before January 1, 2004, has recently come under scrutiny, with critics branding it as an unsustainable fiscal burden. But this narrative misses a fundamental truth — OPS is not a burden on the exchequer; it is a rightful return of deferred wages and retained contributions.
Pension Is Not a Freebie — It’s Deferred Compensation
For pre-2004 employees, pension is not charity or a subsidy. It is a component of their earned salary package, deferred for payment post-retirement. Unlike private-sector employees or post-2004 recruits under the National Pension System (NPS), pre-2004 employees did not receive employer contributions to any retirement fund. Instead, the government promised a lifelong pension, treating it as a part of their compensation.
Effectively, this means pre-2004 employees were paid less during their working years. They accepted this structure in exchange for guaranteed post-retirement income — making pension their deferred wage, not a welfare expense.
The Hidden Corpus: Matching Contribution Retained
Post-2004 employees under NPS receive 10% of their Basic + DA as contribution from their salary and 14% from the government. But in the OPS regime, the government retained this matching contribution.
Had this amount been invested in a provident or pension fund, the accumulated notional corpus — over the decades and with compounding — could easily surpass ₹25 to ₹31 lakh crore. This is not a conjecture but an estimate supported by actuarial and economic studies.
So when the government now pays monthly pensions to pre-2004 retirees, it is simply disbursing what was retained earlier — not creating a new liability.
Why Pension Revisions Are Justified
Pensions must evolve with inflation and changing pay structures. That’s why Dearness Relief (DR) and periodic pension revisions aligned with Pay Commissions are essential. They’re not bonuses — they represent the interest on deferred wages and protect the purchasing power of retired employees.
In any investment or wage-holding mechanism, interest is natural. Why should pension — a withheld portion of salary — be treated differently?
OPS Is a Duty, Not a Drain
Pre-2004 employees served the country under an understanding that the State would ensure their post-retirement security. Denying rightful pension revisions, or calling OPS a drain, breaks this trust. OPS is a contractual, moral, and constitutional obligation.
Conclusion
The government didn’t contribute to any fund for pre-2004 employees. It retained their rightful earnings in the name of future pensions. Paying that back now — through monthly pension and timely revisions — is not a burden.
It is a mature democracy’s obligation to its retired public servants.
Bharat Pensioners Samaj appeals to all stakeholders: let us uphold justice and fairness by recognizing the Old Pension Scheme as what it truly is — the rightful disbursement of deferred wages, not an act of generosity.
S C Maheshwari
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