One Rank One Pension
Also called: OROP · Topic: Financial Markets, Instruments, Insurance and Pensions · NCERT: Beyond NCERT
Meaning
One Rank One Pension (OROP) is a rule for armed forces pensions. Two soldiers who retire at the same rank, after the same length of service, get the same pension, even if they retired in different years. Without this rule, someone who retired long ago gets a smaller pension than a recent retiree, because pay scales rise over time. Under OROP the government revises old pensions from time to time to close this gap. This makes OROP a major reason the defence pension bill is so large. That money cannot then go towards new weapons or equipment.
Example
This is an illustration, not real figures. Two havildars each served 24 years. One retired years ago, when pay was lower, so his pension was set at a lower level. The other retired recently. Under OROP, the older retiree's pension is raised to match what a recently retired havildar with the same service receives. Reducing this growing pension cost was one of the main aims of the Agnipath scheme.
Don't confuse with
- Old Pension Scheme (OPS): This is the pension for civilian government employees: 50% of last pay, indexed to DA (dearness allowance, the extra pay that rises with inflation) and paid from the budget. OROP is narrower. It covers only the armed forces, and its goal is equal pensions for the same rank and service, whatever the retirement date.
- Defined contribution pension (NPS): Here the pension depends on what was paid in and the market returns earned, so the employee bears the risk. OROP is a defined benefit: the government promises the amount and bears the cost.