Apart from fitment factor and DA hike, this time, consultations around the 8th Pay Commission are also focusing on the possibility of introducing a new pension structure for retired central government employees, with retirement security becoming an important issue of discussion. Here’s a look at it:
Age-based pension structure:
“For a decent and dignified life after retirement to support a minimum two member family units full pension should be fixed at 67% of the Last Pay Drawn (LPD) or the Average of the last 10 months emoluments which is more beneficial instead of the present 50%,” NC-JCM in its said memorandum to the 8th CPC.
It also cited a recommendation by a Parliamentary Standing Committee, which proposed granting an additional 5% pension every five years after retirement. Accordingly the structure should be:
- 65 years: 70% of last pay drawn (LPD)
- 70 years: 75% of LPD
- 75 years: 80% of LPD
- 80 years: 85% of LPD
- 85 years: 90% of LPD
- 90 years: 100% of LPD
Choosing between OPS, NPS, or UPS
As per reports, employee representatives say discussions on greater pension flexibility has also gained momentum in recent weeks.
Under the proposal, employees may be allowed to select the pension system that best suits their needs, whether it is OPS, NPS, or UPS.
The Old Pension Scheme (OPS) is a defined-benefit retirement plan for government employees in India. It guarantees a fixed pension linked to the last drawn salary and Dearness Allowance. The payouts are entirely funded by the government, meaning employees do not contribute to the fund during their working years.
The National Pension System (NPS) follows a contribution-based model. Employees contribute a portion of their salary throughout their service, while the government makes a matching contribution. The pension amount eventually depends on the accumulated corpus and market-linked returns.
Critic say that retirement benefit should not depend on market movement
The Unified Pension Scheme (UPS) tries to bridge the gap by combining NPS-style contributions with assured pension benefits
The 8th Pay Commission is significant because it is expected to affect more than 1.1 crore beneficiaries, including central government employees and pensioners, as well as their families.
So far, India has witnessed seven pay commissions. The First Pay Commission was established in January 1946, and since then, a new pay commission has generally been constituted every 10 years. The 8th Pay Commission was constituted on 3 November 2025.