The Old Pension Scheme is fiscally risky but there's a case for it too
The switchover to NPS has been unfair to newer government recruits—for which they should be compensated one way or another. A way out could be to raise the salaries of those under NPS for parity with those under OPS. This would not only be fair, it could also act as an economic stimulus too.
The majority view on the Old Pension Scheme (OPS), at least in opinion spaces, is that it’s detrimental to public finances. Simply put, the OPS, which has been largely disbanded but is slowly coming back, involved paying retired personnel a pension from government revenue as long as they lived. The amount was 50% of the last pay drawn. This held for all employees who joined government service before 2004. Therefore, the government’s liability extends for a prolonged period of time. Those who joined after 2004 contribute from their salary to the new pension scheme (NPS) instead of the provident fund (PF), with the government contributing a similar amount, as with PF. On retirement, one gets payouts from the pension fund in perpetuity. But the government bears no liability. Theoretically, the pension fund cannot guarantee a return, unlike the old scheme which assured payments linked to the last drawn salary, with periodic adjustments made for inflation-based changes in dearness allowance.