The Union government has introduced a new pension scheme that is likely to benefit more than 23 lakh employees. The new Unified Pension Scheme (UPS) assures 50% of the average basic pay drawn over the last 12 months before retirement. State governments can also opt for the new UPS instead of the existing National Pension System (NPS) for their employees.
Fulfilling employees’ demand to make the NPS more beneficial, the new scheme provides a minimum assured amount (Basic Pay) and dearness allowance (DA) in the pension calculation.
The pension amount under the Unified Pension Scheme (UPS) is determined by the last Basic Pay drawn and the total number of years of service.
To be eligible for the scheme, an employee must have completed a minimum of 10 years of service. The pension amount increases with the length of service, ensuring that longer-serving employees receive a higher pension.
- For those with 10-25 years of service, the pension is proportionate to the years of service.
- For employees with 25 years or more of service, the pension is 50% of the average basic pay of the last 12 months.
Table of Contents
What is the Unified Pension Scheme (UPS)?
The Unified Pension Scheme is a pension plan introduced by the Indian government, set to be effective from April 1, 2025. It is designed to provide a more predictable and secure retirement income for central government employees, combining features of both the Old Pension Scheme (OPS) and the National Pension System (NPS). The scheme is seen as a move to offer financial stability to retirees by ensuring a guaranteed pension amount, indexed to inflation.
Unified Pension Scheme UPS vs NPS & OPS Key differences you need to know
| Feature | Unified Pension Scheme (UPS) | National Pension System (NPS) | Old Pension Scheme (OPS) |
|---|---|---|---|
| Pension Amount Calculation | 50% of the average basic pay over the last 12 months | Market-linked, based on accumulated corpus | 50% of the last drawn salary |
| Family Pension | Yes, guaranteed family pension | Yes, based on accumulated corpus | Yes, based on the last drawn salary |
| Employee Contribution | No mandatory contribution | Mandatory contribution (10% of salary) | No contribution required |
| Government Contribution | Fully government funded | Matching contribution (10% of salary) | Fully government funded |
| Inflation Indexation | Yes, pension amount is indexed to inflation | No direct inflation indexation | No direct inflation indexation |
You can also check out the National Pension System Calculator to compare your retirement corpus.
Juggling with so much information and unable to figure out how to use a Unified Pension Scheme Calculator?
Here’s a step-by-step guide:
- Enter Your Basic Salary: Input your last drawn basic salary, which forms the basis of the pension calculation.
- Input Your Years of Service: Provide the total number of years you have served in the government sector.
- Average Basic Pay: If you know your average basic pay over the last 12 months before retirement, enter that. If not, the calculator may use your basic salary for approximation.
- Calculate Your Pension: Once you’ve entered the required details, the calculator will instantly provide an estimate of your monthly pension under the UPS.
- Explore Additional Benefits: Check your eligibility for the minimum pension, family pension, and lump sum payments by following the additional prompts.
Example Calculation
Let’s consider an example to illustrate how the Unified Pension Scheme Calculator works:
Input
- Basic Salary: ₹50,000
- Years of Service: 30 years
- Average Basic Pay: ₹50,000
Result:
- Guaranteed Monthly Pension: ₹25,000 (50% of the average basic pay)
- Family Pension (if applicable): ₹15,000 (60% of the employee’s pension)
- Lump Sum Payment at Retirement: ₹3,00,000 (calculated based on monthly payments)
With these figures, the calculator provides a clear picture of what to expect in retirement, making it easier for you to plan your future.
What are the objectives of the Unified Pension Scheme?
The introduction of the UPS is part of a broader government initiative to ensure financial security for its employees post-retirement. The key objectives include:
- Predictable Retirement Income: By providing a fixed percentage of the average basic salary, UPS ensures that employees have a predictable and steady income in their retirement years.
- Financial Security: The minimum pension guarantee and inflation indexation protect retirees from economic uncertainties and rising living costs.
- Comprehensive Coverage: The scheme’s inclusiveness, covering all employees with at least 10 years of service, ensures that a large section of the workforce benefits from this security.
Tax Implications
The UPS offers tax benefits similar to other pension schemes. Contributions to the UPS are eligible for tax deductions under existing income tax laws. Additionally, lump-sum withdrawals at the time of retirement are expected to be partially or fully tax-exempt, providing further financial relief to retirees.
FAQ
Is UPS is for Central Government employees?
Yes, UPS is specifically designed for Central Government employees.
Does UPS have a good retirement plan?
Yes, UPS offers a secure retirement plan with a guaranteed pension and inflation protection.
Which is better, NPS or UPS?
UPS provides a guaranteed pension and inflation adjustment, while NPS offers market-linked returns. The choice depends on the need for security versus potential higher returns.
What is the pension amount for a basic pay of ₹60,000, ₹70,000, and ₹80,000?
For 25+ years of service: ₹30,000 (₹60,000 basic), ₹35,000 (₹70,000 basic), ₹40,000 (₹80,000 basic). Proportionately less for 10-25 years of service.
How much pension will I get from UPS?
Pension Amount – 50% of Average basic pay over the last 12 months before retirement. For service between 10-25 years, proportional
Family Pension – 60% of the employee’s pension upon their death.
Employee Contribution – 10% of basic salary
Government Contribution – 18.5% of basic salary
Conclusion
The Unified Pension Scheme (UPS) provides central government employees with a guaranteed and inflation-adjusted pension, ensuring financial stability in retirement. By requiring only 10 years of service, it offers broad inclusiveness and balances security with modern needs. Effective from April 2025, UPS promises to deliver predictable income, making it a reliable choice for retirement planning.
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Shall we get DA also on basic salery??
Suppose my basic salery is 100000/-
And duration of job is 19 years,
How much pension will 1 get???
Yes, DA is typically added to the basic salary when calculating the pension.
For a basic salary of Rs 100,000 with 19 years of service, your pension under the Unified Pension Scheme would be Rs 50,000 per month, plus DA (Dearness Allowance).
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