The central government has formally rejected requests from five states to move ₹1.45 lakh crore from the National Pension System (NPS) back to the Old Pension Scheme (OPS). The Ministry of Finance clarified that no legal framework exists to allow such a transfer, citing the long-term fiscal risks associated with restoring the unfunded Old Pension Scheme.
The central government has firmly declined requests from five Indian states to reclaim approximately ₹1.45 lakh crore in assets under management from the National Pension System (NPS). Rajasthan, Punjab, Chhattisgarh, Jharkhand, and Himachal Pradesh had sought to transfer these accumulated funds to the Old Pension Scheme (OPS).
Minister of State for Finance, Pankaj Chaudhary, explained to the Lok Sabha that there is no legal provision under the Pension Fund Regulatory and Development Authority (PFRDA) Act, 2013, to refund this pension corpus to state governments. This accumulated fund consists of contributions from both the state governments and their employees, along with the interest earned over time.
Fiscal Sustainability Concerns
Beyond the legal restriction, the central government reiterated its opposition to the Old Pension Scheme. The government maintains that the OPS is an unfunded, defined-benefit system that places a heavy and unsustainable burden on the national exchequer. By rejecting the request, the Centre has reaffirmed its commitment to the NPS, which is a defined-contribution model where the liability is limited to the contributions made.
For the Indian economy and financial markets, this decision provides clarity on pension policy. The NPS corpus is invested across various financial instruments, helping to support infrastructure development and capital market liquidity. The potential withdrawal of such a large sum would have necessitated a significant liquidation of assets, which could have disrupted the stability of the funds and, by extension, the broader financial system.
Breakdown of Requested Funds
The financial impact of this reversal request was substantial, with Rajasthan seeking the highest amount. The state-wise breakdown of the requested pension corpus is: Rajasthan (₹53,403.89 crore), Punjab (₹40,673.08 crore), Chhattisgarh (₹24,030.04 crore), Jharkhand (₹14,420.90 crore), and Himachal Pradesh (₹12,525.96 crore).
The government's stance remains that the restoration of the Old Pension Scheme is not under consideration, regardless of individual state decisions to move back to the older system. The decision protects the integrity of the NPS architecture and ensures that the long-term fiscal liabilities of the state and central governments remain within manageable limits. Investors and stakeholders will now look to see how the affected states manage their fiscal planning without access to these accumulated pension assets.