Which Pension Scheme is Best For Retirement: Guaranteed Pension System (GPS) or Old Pension Scheme (OPS)

In the midst of increasing demands from government workers for the revival of the Old Pension Scheme (OPS) in various states, the Andhra Pradesh Assembly has recently approved the AP Guaranteed Pension Scheme (GPS). The AP Guaranteed Pension Scheme bill received approval in the Assembly on Wednesday, leading to the transition of all state government employees from the Old Pension System (OPS) to the Contributory Pension System (CPS).

This decision was made in response to persistent requests from employees to reconsider the contributory pension scheme and assess the feasibility of reinstating the Old Pension System (OPS). Now, let's analyse the advantages and disadvantages of the Old Pension System and the Guaranteed Pension System to determine which one provides the most favourable retirement benefits.

Features of Old Pension Scheme

• Workers have the right to obtain a pension amounting to 50% of their final salary.

• This plan guarantees a lifelong source of income after retirement.

• The government covers the entire pension sum for employees following retirement, and there is no requirement for salary deductions during their service tenure.

Features of Guaranteed Pension Scheme

• Workers will receive a fixed pension equal to 50% of their last salary.

• Additionally, dearness relief (DR) will be announced semi-annually to increase the pension amount.

• The program guarantees a monthly spousal pension equal to 60% of the assured pension after the pensioner's passing. Retired government employees will receive a minimum monthly pension of Rs 10,000.

• The plan will incorporate elements from both the modern and traditional pension schemes.

• Individuals who have been dismissed, removed from service, or are facing compulsory retirement due to disciplinary actions will not qualify for the program.

Guaranteed Pension System (GPS) Vs. Old Pension Scheme (OPS): What To Choose For Your Retirement

The old plan is usually provided to government workers, whereas the New Pension System (NPS) was extended to all individuals aged 18 to 60 in 2009. The Guaranteed Pension Scheme legislation from the Andhra Pradesh government will secure pensions through the NPS. At present, NPS investments provide an annual return of 9 to 12 per cent, accompanied by tax advantages.

Nonetheless, government employees will now need to make monthly contributions based on their basic salary and dearness allowance, unlike the Old Pension Scheme (OPS), where government employees were not required to contribute anything.