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Summary:

Tamil Nadu is set to implement the Tamil Nadu Assured Pension Scheme (TAPS), a system closely resembling the Old Pension Scheme (OPS), and considered an improvement over the existing Unified Pension Scheme (UPS). This new scheme, expected to cover approximately 6.24 lakh employees currently under the Contributory Pension Scheme (CPS), promises more favorable terms for pensioners, including a pension based on the last drawn salary rather than the average of the last 12 months, and broader family coverage. The state government plans to invest pension funds with the Pension Fund Regulatory and Development Authority (PFRDA) for higher returns, addressing previous criticism for relying solely on the Life Insurance Corporation (LIC). The government believes the scheme is financially sustainable, projecting stable pension liabilities as a percentage of State Own Tax Revenue (SOTR).

News Article:

Tamil Nadu to Roll Out New Pension Scheme Offering Improved Benefits

CHENNAI, January 4, 2026 – The Tamil Nadu government is preparing to launch the Tamil Nadu Assured Pension Scheme (TAPS), a move expected to benefit hundreds of thousands of state employees. The TAPS, which closely mirrors the Old Pension Scheme (OPS), is designed to offer more favorable terms compared to the Unified Pension Scheme (UPS).

Key benefits of the TAPS include basing pension payments on 50% of the last month’s salary, compared to the UPS’s calculation based on the average of the last 12 months. The TAPS also expands family pension coverage to legal heirs nominated by the pensioner, going beyond the UPS’s limitation to legally wedded spouses. Furthermore, it assures a payout regardless of the length of service, unlike the UPS which requires a minimum of 10 years.

Approximately 6.24 lakh employees currently under the Contributory Pension Scheme (CPS) will have the option to migrate to the TAPS.

In a shift from current practice, the government plans to invest pension funds with the Pension Fund Regulatory and Development Authority (PFRDA) instead of relying solely on the Life Insurance Corporation (LIC). This decision follows criticism, including a report from the Comptroller and Auditor General (CAG) in October 2025, highlighting the potential for higher returns through PFRDA investments.

Government officials express confidence in the scheme’s financial viability. Projections indicate that despite annual increases in pension allocations, the proportion of pension liabilities will remain stable at around 21% to 22% of the State Own Tax Revenue (SOTR).

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