The Unified Pension Scheme, or UPS and National Pension System or NPS have significant differences though both aim to provide financial assistance in post-retirement years. In UPS the pension will be 50% of the last drawn salary of the preceding 12 months. It is applicable for those who have completed 25 years of service at a minimum. The pension will be inflation-linked.
UPS is only for government employees. NPS which is open to all Indians who have crossed 18 years. In fact, an NPS Vatsalya is coming shortly to enable parents to start an NPS scheme for minors.
UPS will become effective from April 1, 2025. The beneficiaries will be those retiring by March 31, 2025. Moreover, all employees will get the option of choosing between the UPS and NPS from FY26.
NPS vs UPS
The most significant point of the UPS is that it will offer guaranteed pension. The rate will be 50% of the last drawn pay in the preceding 12 months. But those with service tenure between 10 to 25 years, the pension will be calculated on a pro-rata basis.
On the contrary, the NPS is a market-linked instrument. Therefore, it does not guarantee any fixed amount. The returns are generated by the pool that is accumulated over a period of time depending on the performance of the equity markets.
The UPS guarantees a minimum payment of Rs 10,000 per month, of an employee has worked for at least 10 years. The NPS does not have any provision for a minimum pension.
Individual contributions define the pension laid down by NPS rules. It envisages 10% contribution from the basic salary of the employee and 14% contribution from the government. For UPS, the employee will continue to pay 10% from his/her salary whereas the government will chip in with 18.5% compared to 14% currently.
UPS will pay 60% of the pension the employee to the family members if he/she passes away, But NPS has no provision for reduction of pension amount. The family’s pension will solely be determined by the corpus amassed in the pension fund and the annuity plan which the subscriber opted for.
The Unified Pension Scheme is another step by the Narendra Modi government to address the pension issue in India. But it has significant differences with the NPS. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
