What is the pension formula for bank employees under OPS?

Under the Old Pension Scheme, bank employees receive 50% of their last drawn basic pay as pension after completing the full qualifying service of 33 years. For shorter service, the pension is proportionate — 1/66 of last basic per year of qualifying service. A minimum pension of ₹9,284 per month (as revised under the 12th bipartite) is also guaranteed.

What is pension updation for bank employees?

Pension updation refers to the upward revision of pension amounts for retired bank employees (OPS) to align with the pay scales of the currently serving batch. Employees who retired before 2010 receive pensions based on old pay scales that are now significantly lower than current scales. Unions have been demanding a one-time updation since the 10th bipartite — it remains unresolved and is a key demand for the 13th Bipartite Settlement.

OPS & NPS ExplainedPension Updation PendingUpdated Aug 2026

Bank Employee Pension Guide 2026

Q: Which pension scheme do bank employees get?

Bank employees who joined public sector banks before 1 April 2010 are under the Old Pension Scheme (OPS), which provides a defined benefit pension of 50% of the last drawn basic pay after 33 years of qualifying service. Employees who joined on or after 1 April 2010 are covered under the National Pension System (NPS), which is a market-linked defined contribution scheme.

Q: How is gratuity calculated for bank employees?

Gratuity for bank employees (under the Payment of Gratuity Act, 1972) is calculated as: (Last drawn basic pay + DA) × 15/26 × number of completed years of service. The maximum gratuity payable has been enhanced to ₹25 lakh under the 12th Bipartite Settlement. Employees must complete a minimum of 5 years of service to be eligible for gratuity.

Q: What is family pension for bank employees?

Family pension under OPS is paid to the spouse (or eligible dependent) of a deceased bank employee or pensioner. The ordinary family pension is 30% of the last drawn basic pay. An enhanced family pension equal to 50% of last basic pay is payable for the first 7 years after death or until the surviving spouse turns 65, whichever is earlier. Minimum family pension is ₹4,850/month.

Q: How does NPS work for bank employees?

Under NPS, both the employee and the bank contribute 10% of (basic + DA) each month to the NPS corpus. The corpus is invested in market-linked funds. On retirement, up to 60% of the corpus can be withdrawn tax-free; the remaining 40% must be used to purchase an annuity that pays a monthly pension. The pension amount is not predetermined — it depends on the corpus size and annuity rates at retirement.

OPS vs NPS · Pension Formula · Pension Updation Demand · Gratuity · Family Pension

Bank employees who joined before 1 April 2010 are under OPS — a guaranteed 50% of last basic as pension. Those who joined after are under NPS. Pension updation for pre-2010 retirees is the most important unresolved pension demand heading into the 13th Bipartite Settlement.

OPS Pension

50% of Basic

OPS Eligible

Pre-Apr 2010

Max Gratuity

₹25 Lakh

Family Pension

30% of Basic

OPS vs NPS — Which Pension Scheme Do You Fall Under?

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Old Pension Scheme (OPS)

Employees who joined before 1 April 2010

Pension:50% of last basic (33+ years service)

Contribution:Employee contributes to bank's pension fund

Risk:Zero investment risk — defined benefit

Advantages

✓Guaranteed pension amount
✓Fully inflation-indexed (DA on pension)
✓Family pension provision
✓Commutation facility
✓Minimum pension guaranteed

Limitations

✗No portability to private sector
✗Lower immediate take-home (pension fund deduction)
✗Based on last basic — not actual career earnings

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New Pension System (NPS)

Employees who joined on or after 1 April 2010

Pension:Depends on corpus & annuity rates at retirement

Contribution:Employee 10% + Bank 10% of (basic + DA)

Risk:Market-linked — corpus value fluctuates

Advantages

✓Higher retirement corpus if markets perform well
✓60% lump sum withdrawal at retirement (tax-free)
✓Portable across employers
✓Additional Section 80CCD(1B) tax benefit of ₹50,000

Limitations

✗No guaranteed pension amount
✗Annuity rates vary — risk of lower pension in low-rate environment
✗Mandatory annuity purchase (40% of corpus)
✗No commutation like OPS

Pension Updation — The Biggest Unresolved Demand

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Pension updation has been demanded since the 10th Bipartite Settlement and remains unresolved as of August 2026. Approximately 5–6 lakh pre-2010 bank retirees are affected. It is expected to be a non-negotiable demand in the 13th Bipartite Settlement (due November 2027).

What it means

Pre-2010 retirees receive pension based on old pay scales. For example, a clerk who retired in 2005 on a basic of ₹7,000 gets pension of ₹3,500/month — while current clerks start at ₹17,900. Pension updation would revise their pension to reflect current pay scales.

Who benefits

Approximately 5–6 lakh bank pensioners who retired under OPS before the 9th/10th bipartite revisions would see meaningful increases. Many receive pensions below ₹10,000/month despite decades of service.

Unions' demand

Bank unions have demanded pension updation since the 10th bipartite. The demand was reiterated strongly in the 12th bipartite but was not included in the signed settlement. It is expected to be a core demand in the 13th bipartite.

IBA's position

IBA has historically resisted pension updation citing the financial burden on banks — estimated at several thousand crore rupees in additional outgo. Banks fund OPS pension from their own resources (unlike central government's pension-funded model).

13th bipartite

Unions are expected to make pension updation a non-negotiable demand in the 13th bipartite. The DFS 12-month deadline and the NCBE committee formation signal that the 13th BPS may address this long-pending issue — but IBA's financial capacity and bank profitability at the time of negotiation will be decisive.

Gratuity Calculation — Formula & Examples

Gratuity Formula

(Last Basic + DA) × 15 ÷ 26 × Years of Service

Maximum: ₹25,00,000 | Minimum service: 5 years

Gratuity is payable on resignation (after 5 years), superannuation, death, or disablement. The maximum gratuity ceiling was enhanced to ₹25 lakh under the 12th Bipartite Settlement. For death or disablement, gratuity is payable even without completing 5 years of service.

Profile	Last Basic	DA (27.83%)	Gratuity Payable
Clerical — 20 years	₹27,900	₹7,767	₹4,11,542
Clerical — 30 years	₹37,900	₹10,553	₹8,38,610
Officer Scale I — 20 years	₹67,140	₹18,691	₹9,90,358
Officer Scale I — 30 years	₹84,010	₹23,395	₹25,00,000(capped)

Illustrative calculations using approximate basic pay at the given stage. Actual gratuity depends on exact last drawn basic + DA at retirement and completed years of service.

Family Pension & Pension Commutation

👨‍👩‍👧 Family Pension (OPS)

Ordinary:30% of last drawn basic pay — payable to spouse for life after the pensioner's death.
Enhanced:50% of last basic — payable for the first 7 years after death, or until the surviving spouse turns 65, whichever comes first.
Minimum:₹4,850/month (ordinary family pension) as per 12th bipartite revision.
Children:Eligible dependent children receive family pension if no eligible spouse. Only one child pension is payable at a time.

📋 Pension Commutation (OPS)

What it is:Option to receive a lump sum by giving up a portion of monthly pension — up to 1/3 of the pension can be commuted.
Commutation factor:Depends on age at retirement — typically 8.194 (for age 60). Commuted amount = commuted pension × 12 × commutation factor.
Restoration:Commuted portion is restored after 15 years from the date of commutation — full pension resumes automatically.
Tax:Commuted pension is fully tax-exempt under Section 10(10A) of the Income Tax Act.

What's Coming

13th Bipartite Settlement — Pension Updation Expected

Pension updation for pre-2010 retirees is expected to be a non-negotiable demand. See what the 13th bipartite means for pensions, salary, and 5-day banking.

13th Bipartite Guide →

Frequently Asked Questions — Bank Employee Pension

Which pension scheme do bank employees get?▼

Pre-April 2010 joiners: OPS (50% of last basic). Post-April 2010 joiners: NPS (market-linked defined contribution).

What is the pension formula under OPS for bank employees?▼

50% of last drawn basic pay for 33+ years service. Proportionate for less service (1/66 of basic per year). Minimum pension ₹9,284/month (12th bipartite).

What is pension updation?▼

A long-pending demand to revise pension of pre-2010 retirees to current pay-scale equivalents. Not yet implemented. Expected to be a key demand in the 13th Bipartite Settlement (2027).

How is gratuity calculated for bank employees?▼

(Last basic + DA) × 15/26 × years of service. Maximum ₹25 lakh (enhanced in 12th bipartite). Minimum 5 years service required.

What is family pension for bank employees?▼

30% of last basic (ordinary). Enhanced: 50% of last basic for first 7 years or until age 65. Minimum ₹4,850/month.

How does NPS work for bank employees?▼

Employee 10% + Bank 10% of (basic + DA) per month goes into NPS corpus. At retirement: 60% corpus withdrawal (tax-free) + 40% mandatory annuity purchase for monthly pension.

Related — Bipartite & Salary Resources

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13th Bipartite Settlement 2027

Pension updation, 5-day banking, 25–30% wage revision

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Complete Bipartite Settlement Guide

All 12 settlements, pay scales, allowances explained

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12th Bipartite Salary Calculator

Grade-wise take-home with PF — for OPS and NPS

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DA Rates for Bank Employees