RAS question
The key difference between NPS and OPS is:
Correct answer: (B) NPS is defined contribution while OPS is defined benefit.
NPS is a defined-contribution pension system whose pension depends on contributions and market-linked returns, while OPS is a defined-benefit pension system that pays 50% of the last drawn basic salary and is fully funded by the government.
Explanation
The key distinction is the nature of the pension promise. PFRDA describes NPS as a defined-contribution pension system: the subscriber and employer contribute during working life, and the eventual retirement income depends on the accumulated contributions and market-linked returns from the chosen investments. That is why NPS does not promise a fixed pension amount. OPS works on the opposite logic. As a defined-benefit system, the pension is fixed by rule at 50% of the employee's last drawn basic salary, and OPS is fully funded by the government. So the exam contrast is not about the sector or mere eligibility; it is about contribution-based, market-linked accumulation under NPS versus a salary-linked, government-funded pension promise under OPS.
Why the other options are wrong
- (A) OPS is not marked by employee contribution here; OPS is fully funded by the government.
- (C) NPS does not give a guaranteed pension because its retirement income depends on contributions and market-linked returns.
- (D) NPS is not confined to the private sector, as PFRDA says it applies to Central Government employees joining from 1 January 2004 and has been adopted by most State Governments.
Concept
This tests pension reform under Indian Economy, especially the shift from defined-benefit public pensions to defined-contribution systems. It recurs in RAS because pension liabilities, fiscal sustainability and employee welfare are standard themes in government finance questions.