Old Pansion Scheme Vs New Pansion Scheme


What is the difference between an old pension scheme and NPS? Which is more beneficial for government employees?

The primary difference is that old pension scheme was Benefit Defined whereas NPS is Contribution Defined.

In the first case the benefit is fixed, i.e. it was predetermined how much pension an employee will get linked to his last drawn salary and length of service. This requires contribution amount is reverse calculated on the basis of future liability on the basis of actuarial valuation. On tops, in this case part contribution was shared by employer and part by Govt of India. However Govt of India didn't extend this benefit to new employees after a certain date and started offering them benefits under EPF which also includes another pension scheme called EPS.


In case of NPS employee freezes his contribution as a fixed value or percentage of salary and keep contributing regularly. Since all contributions are voluntary he may also change the amount any time. He earns interest on his contribution (NPS has been generating handsome returns as this fund is allowed to invest in equities too). At the time of superannuation, employee is given pension on the basis of annuity value of his total corpus at that instant.

Important Points of Different


  • - The beneficiaries of the old pension get the facility of General Provident Fund (GPF).
  • - There is no deduction from the salary of employees under the old pension.
  • - The beneficiaries of the old pension get a guaranteed pension equal to 50% of the last salary.
  • - Old pension is fully paid by the government.
  • - A case is filed against the government when there is a dispute in the old pension.
  • - On retirement, the old pensioners get 16.5 times the amount as gratuity as per the final salary.

  • Old pensioners get death gratuity on death in duty. After the 7th Pay Commission, this amount has been increased from 10 lakh to 20 lakh.

    • - Under the old pension system, the family gets a family pension if the employee dies in service.
    • - Old pensioners also get dearness allowance and pay commissions.
    • - Old pensioners get loan facility on GPF.
    • In the old pension scheme, no income tax has to be paid on withdrawal of GPF.
    • - There is a fixed interest rate for GPF.
    Important Link : 

    Read Details in Gujarati : From Here


     In case of NPS employee freezes his contribution as a fixed value or percentage of salary and keep contributing regularly. Since all contributions are voluntary he may also change the amount any time. He earns interest on his contribution (NPS has been generating handsome returns as this fund is allowed to invest in equities too). At the time of superannuation, employee is given pension on the basis of annuity value of his total corpus at that instant.

    Old Pansion Scheme Vs New Pansion Scheme