When I was first trying to learn about pension planning, I did not understand what pension actually is and how it works. All I knew was that after leaving the job or completing a certain service period, we get a regular income from our government, which we know as pension.

Pension in India is a means of financial security that helps retired people to live their life easily with few monthly payments. These pension plans are offer and managed by the government and private entities and have a wide range of options that suit different types of employment and personal financial planning. Its main purpose is to help those who are retired from job, provide them a stable life even after retirement and provide financial stability.

Illustration of pension plans in India, including Old Pension Scheme (OPS), National Pension System (NPS), Atal Pension Yojana (APY), Employees' Pension Scheme (EPS), and Assured Pension options
Different pension plans in India offering retirement income security, such as OPS, NPS, APY, EPS, and Assured Pension Schemes

Types of Pensions

  1. Old Pension Scheme (OPS)
  2. National Pension System (NPS)
  3. Unified Pension Scheme (UPS)
  4. Atal Pension Yojana (APY)
  5. Employees’ Pension Scheme (EPS)
  6. Assured Pension Schemes

1. Old Pension Scheme (OPS)

Old Pension Scheme (OPS) India - Guaranteed Retirement Income for Government Employees
The Old Pension Scheme (OPS) guarantees a fixed pension based on the last drawn salary for eligible government employees.
  • The old pension scheme, which is also known as the defined benefit scheme in India, Before the National Pension System came into force in 2004, it was applicable for government employees. Under this scheme, after retirement, government employees used to get pension in the form of a lump sum amount which was usually based on their last Drawn salary and their service period.
  • OPS provided a fixed pension benefit to employees with no investment risk like NPS. Even today many states have restarted the this pension scheme and it is still going on. We have given detailed information about the office. You can get complete knowledge about the OPS through the guide given below.

Also read: full details about the Old Pension Scheme and its benefits!

2. National Pension System (NPS)

National Pension System (NPS) in India: A flexible, market-linked retirement plan for both public and private sector employees
Explore how the National Pension System (NPS) offers market-linked returns and financial security for retirement.
  • The National Pension System Scheme is a government sponsored pension scheme which was launched in 2004 by our Indian Government. It is mandatory for all Government employees who have joined any Government service after 1st January 2004 except our Armed Forces. Apart from our Indian Government employees it was also made available for private sector employees and individuals which is still applicable till date.
  • NPS is a defined contribution scheme in which both the employer and the employee together contribute to the NPS account. All these contributions are invested in a mix of equity and debt markets, growing the corpus over time based on market returns. At the time of retirement, members can withdraw a part of the corpus and use the remaining balance to purchase annuity plan for regular pension.
  • NPS is regulated by the Pension Fund Regulatory and Development Authority (PFRDA).

Also Read: Discover all you need to know about the National Pension System here!

3. Unified Pension Scheme (UPS)

Unified Pension Scheme 2025: Expected Benefits and Contributions with Visual Representation
unified pension scheme (UPS)
  • Unified Pension Scheme is a now more modern form of a joint or unified pension plan that consolidates various government pension schemes on a single platform.This scheme was recently informed through a notification by the Cabinet of our Government of India, This will be implemented all over India from April 2025 as per the notification.
  • The aim of this UPS is to simplify the pension process and make it accessible and provide equal benefits to government and private sector employees.

Also read: Learn more about the Unified Pension Scheme and its features!

4. Atal Pension Yojana (APY)

  • Atal Pension Yojana (APY) is a pension scheme launched by the Government of India in 2015 which is primarily aimed at unorganised sector employees. In this scheme, you are provided with a minimum guaranteed pension which can range from ₹1,000 to ₹5,000 per month.
  • APY is available to Indian citizens in the age group of 18 to 40 years and contributions are required till the age of 60 years. The scheme also provides for Government contribution to those subscribers who are not covered under any other statutory social security scheme and is not an income tax payer.

Also read: Get complete details on the Atal Pension Yojana and eligibility requirements!

5. Employees’ Pension Scheme (EPS)

  • The Employees’ Pension Scheme (EPS) is provided by the Employees’ Provident Fund Organisation (EPFO) and is designed for employees in the organised sector. This scheme provides a monthly pension to the employees after retirement which is also calculated based on the last salary and years of service same as OPS.
  • EPS is funded by contributions from the employer, with a portion of the Employees’ Provident Fund contributions is allocated towards the EPS. The amount of pension received depends on the years of service and the average salary of the last few years

Find out everything about the Employees’ Pension Scheme benefits!

6. Assured Pension Schemes

Assured Pension Scheme guarantees a fixed monthly pension based on specific criteria such as years of service and pay Level. Some of the plans for this pension scheme are not official government schemes but represent some special pension arrangements offered by employers or regional programs.

Assured schemes, like the assured pension under EPS, provide a safety net, ensuring a minimum pension even if market-based or interest-based pension schemes vary.

Explore the details of Assured Pension Schemes and how they work!

Other Pension Plans in India

In addition to government schemes, insurance companies and financial institutions also offer pension plans tailored to individual needs. These private plans often include the following options and features:

  • Immediate Annuity Plans: These types of plans start paying out immediately after a lump sum investment and provide fixed income for whole life.
  • Deferred Annuity Plans: In this scheme contributions are made over time, and the pension payout starts after a particular deferment period, often at retirement.
  • Unit-Linked Pension Plans (ULPPs): These combine insurance and investment, offering pension benefits linked to market returns.
  • Traditional Pension Plans: These scheme provide guaranteed returns with low risk and may have a fixed rate of interest or bonuses.

Key Points about Pension Types:

  • OPS: Guaranteed pension, based on last drawn salary.
  • NPS: Market-linked, defined contribution, flexible investment options.
  • UPS: Conceptual unified pension approach for streamlined management.
  • APY: Guaranteed pension for unorganized sector workers.
  • EPS: Government pension based on EPFO contributions.

Each of these pension types serves different needs, from low-risk guaranteed returns for government employees to flexible market-linked returns for private individuals looking to build a retirement corpus.

Disclaimer: epfoservices.org is a private, non-governmental website providing educational content on government schemes. While we strive to present accurate information, please note that the details may change over time. For official, up-to-date information, kindly visit the respective government websites. We are not affiliated with any government body, and the content shared here is for informational purposes only.

Frequently Asked Questions (FAQ)

1. What is a pension, and why is it important?

A pension is a regular income that individuals receive after retirement, helping them manage daily expenses and maintain financial stability. It provides financial security in retirement, allowing people to meet their needs without relying solely on savings.

2. What is the difference between OPS and NPS?

Old Pension Scheme (OPS) is a defined benefit plan offering fixed pensions to retired government employees based on their last salary. National Pension System (NPS), however, is a defined contribution plan, where the pension amount depends on contributions and market performance. NPS is available to both public and private sector employees, while OPS is only available to certain government employees.

3. Are pension contributions tax-deductible in India?

Yes, pension contributions are tax-deductible under certain sections of the Income Tax Act:
→Contributions to NPS are deductible up to ₹1.5 lakh under Section 80CCD(1).
→An additional deduction of ₹50,000 is available under Section 80CCD(1B) for NPS subscribers.
→For other pension schemes, consult a tax advisor, as the tax benefits may vary.

How is the pension calculated under the Employees’ Pension Scheme (EPS)?

The EPS pension amount is calculated based on a formula: (Pensionable Salary x Service Period) / 70, where Pensionable Salary is the average salary of the last 60 months, and Service Period is the total years worked. The minimum EPS pension is set at ₹1,000 per month.

Can I switch from NPS to any other pension scheme, like OPS?

No, once enrolled in NPS, switching to OPS is generally not permitted. OPS is only available to select government employees hired before 2004. However, NPS subscribers can transfer their account to other sectors if they change jobs, like moving from private to government employment.

For more information on financial assistance schemes by government, visit our All Financial Assistance page.