8th Pay Commission Update: Government May Reinstate Old Pension Scheme, Reveals Major Plans in Parliament

In a significant development for government employees and pensioners, the Central Government has given an important update on the 8th Pay Commission during a Parliament session. Minister of State for Finance, Pankaj Chaudhary, shared key insights in the Rajya Sabha, revealing multiple recommendations made by employee unions. These include the reinstatement of the Old Pension Scheme (OPS), cashless medical facilities, education allowance for children, and a revision of the Standard Consumption Norms (SCN).

Demand for Restoration of Old Pension Scheme Gains Momentum

One of the most discussed demands by government employee unions is the reimplementation of the Old Pension Scheme (OPS)—especially for those who joined government service after January 1, 2004. Currently, such employees are under the New Pension Scheme (NPS), which is market-driven and doesn't offer guaranteed post-retirement benefits like OPS.

If this demand is accepted, it will benefit millions of employees, offering them financial security after retirement. Moreover, employees may also be allowed to switch to a Unified Pension Scheme (UPS), which deducts a portion from their salaries to ensure consistent pension benefits.

Push for a Hike in Basic Pay Through SCN Revision

Another notable recommendation from unions is to raise the Standard Consumption Norm (SCN) from the existing 3% to 3.6%. This figure determines the minimum required income to meet basic nutrition and living needs. If implemented, this revision would directly lead to an increase in employees’ basic salary, benefiting both current employees and future retirees.

Education Allowance and Healthcare Relief on the Cards

Government staff unions have also urged the government to reinstate education allowance for their children, which would significantly reduce their education-related expenses. Additionally, a proposal for cashless medical facilities for both employees and pensioners has been presented. This would enable access to quality healthcare without the burden of upfront medical costs—ensuring financial relief during treatment.

Status of the 8th Pay Commission Implementation

The official announcement of the 8th Pay Commission was made in January 2025. However, the Terms of Reference (ToR)—the formal set of guidelines defining the commission’s objectives—have not yet been finalized. The government has clarified that the commission’s recommendations will be implemented starting January 1, 2026.

This means that if there's a delay in submitting the recommendations, employees and pensioners may receive arrears, potentially increasing their lump sum benefits upon implementation.

Who Will Benefit?

According to estimates, the implementation of the 8th Pay Commission’s proposals could benefit 35 to 45 lakh (3.5 to 4.5 million) current central government employees and 68 lakh (6.8 million) pensioners. This reform is expected to significantly impact the consumption-driven economy, increasing purchasing power and household spending.

Final Decision Rests with the Government

It’s important to note that all these proposals—OPS restoration, salary revisions, education allowance, and medical benefits—are recommendations made by employee associations. The final approval and implementation lie in the hands of the Central Government.

However, the fact that the Minister of State for Finance addressed these demands in Parliament clearly indicates that the government is actively considering these proposals and is committed to a timely rollout of the 8th Pay Commission.

With increased attention in the coming months, expectations are high that the commission’s framework will be finalized soon, paving the way for long-awaited benefits to central government employees and pensioners.