The Unified Pension Scheme (UPS), introduced by Central Government on 24th August 2024, will be implemented from 1st April 2025 and is expected to benefit millions of Central Government employees. It aims to provide stability, dignity and financial security for government employees after retirement, ensuring their well-being and a secure future.
Unified Pension Scheme, UPS Eligibility, benefits, UPS vs NPS?
What is Unified Pension Scheme?
The Central Government employees have the option to choose between UPS and the NPS so, they can continue with NPS or switch to the UPS scheme. However, once employees choose UPS, the decision is final and cannot be reversed. The state governments can also adopt and implement the UPS scheme for theirs State Government employees. If all states adopt the UPS scheme, it could benefit over 90 lakh government employees currently covered under the NPS scheme across India.
In this Scheme the employee and employer contribution is as below -
- Employee Contribution: 10% of basic salary + dearness allowance
- Employer Contribution: 18.5% of basic salary + dearness allowance
UPS Scheme eligibility:
- Government employees who have completed at least 10 years of service are eligible for a fixed pension amount.
- Government employees who have completed at least 25 years of service are eligible to receive a percentage of their average basic pay as a pension.
- Government employees who are covered under the National Pension System (NPS) and those opting for Voluntary Retirement Scheme (VRS) under NPS.
UPS Scheme benefits:
- Assured pension: Retired employees will receive a pension of 50% of their average basic pay over the previous 12 months before retirement. This benefit is provided to employees with at least 25 years of service. Proportionate pension benefits are offered to employees with shorter service periods (10 years to 25 years).
- Government contribution: The government will contribute 18.5% of the employee’s basic salary to the pension fund. The employees will contribute 10% of their basic salary to the pension fund.
- Assured family pension: In case of the pensioner’s death, 60% of the pension immediately before the retiree’s demise will be given to her/his spouse.
- Assured minimum pension: An employee with at least 10 years of service will receive Rs. 10,000 per month upon superannuation.
- Inflation indexation: Inflation indexation will be provided on assured pension, assured minimum pension and assured family pension. The Dearness Relief (DR) will be based on the All India Consumer Price Index for Industrial Workers (AICPI-IW) similar to service employees.
- Lumpsum payment: Retirees will receive a lump sum payment along with their gratuity at the time of superannuation. This payment will be equal to one-tenth of the monthly emoluments (pay + DA) as on the superannuation date for every six months of completed service. It will not reduce the amount of assured pension.
Unified Pension Scheme vs NPS
The UPS scheme is a combination of both OPS and NPS. Like OPS it has defined benefit and a defined contribution, but unlike the OPS, UPS is contributory. Besides having the provision for contribution by the employees, the UPS lacks the facility of revision as has been the case with the OPS. The below table provides the differences between UPS and NPS:
National Pension Scheme (NPS) |
Unified Pension Scheme (UPS) |
|
Pension Assurance |
Defined Contribution, No Pension guarantee, Pension amount is based on accumulated corpus and is subject to market fluctuations. |
Defined Benefit, Guaranteed (50% of average salary) Pension amount is guaranteed and fixed after retirement. |
Government Contribution |
Government contributes 14% of employee's basic pay and DA, While Employee's Contribution 10% of salary. |
Government contributes 18.5% of employee's basic pay and DA, while employee's contribution is 10% of salary. |
| Investment Allocation | Diversified (Equity, Debt, Government Securities). |
Primarily Government Securities. |
| Risk Level | Market Dependent. |
Lower Risk due to Government Guarantee. |
Eligibility |
Eligible if you are an Indian citizen and your corporate has adopted the NPS scheme |
Designed for current NPS holders, including those who have retired |
Other features |
Portable, offers tax benefits, and allows subscribers to choose investment options and fund managers |
Provides a safety net for retirees |
1. Question - Which is better NPS or UPS?
Answer - a) UPS has guaranteed, provides a guaranteed pension amount, while the pension amount under NPS returns is not fix may be high, depends on the investments made in the market-linked security schemes. Before investment in NPS, it is important to take proper guidance from market expert.
b) UPS provides an assured pension, NPS may provide a higher pension amount due to higher returns in the market-linked investments.
c) UPS may be better for employees who do not want to take any risk and get a guaranteed pension amount, while NPS may be better for employees who are willing to take some risk and make market-based investments and get a higher return.
2. Question - What is the difference between Old Pension scheme (OPS) and UPS pension?
Answer - The OPS provides a pension of 50% of the last drawn salary of employees, while UPS also provides a pension of 50% of the last drawn salary of employees but only for those employees who have completed 25 years of service.
Employees who retire with 10 to 25 years of service will get a proportionate amount as a pension under UPS.
Employees do not have to contribute to the pension fund under OPS, but employees need to contribute 10% of their basic pay under UPS. Similarly, the government will also contribute 18.5% of the basic salary under UPS.
3. Question - Is UPS scheme for private employees?
Answer - Currently, the UPS scheme is only for government employees. Thus, private employees are not covered under UPS.
4. Question - Does UPS offer a lumpsum pension?
Answer - Yes, retired employees will receive a lumpsum payment along with their gratuity at the time of superannuation. This payment will be equal to one-tenth of the monthly emoluments (pay + DA) as on the superannuation date for every six months of completed service. However, it will not reduce the amount of assured pension.