NPS or UPS: Which pension scheme is better for central employees, Understand here

The Modi government has given the first big gift to the central employees in its third term. Actually, the cabinet of the Modi government has approved to give 50 percent of the salary as a guaranteed pension to 23 lakh government employees joining the service under the National Pension System (NPS).

This has been identified as the Unified Pension Scheme (UPS). Now there are many questions in the minds of central employees, let us answer those questions sequentially.

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What is Unified Pension Scheme (UPS)?

Under this scheme, government employees will now be entitled to get 50 percent of the average basic salary received in the last 12 months before retirement as pension. The minimum service period for getting 50 percent of the salary as pension should be 25 years. However, pension will be given proportionately for a minimum service period of up to 10 years.

Who is the scheme for?

The National Pension System (NPS) is applicable to all central government employees who joined service after April 1, 2004. All the employees who joined service after 2004 and have retired or will retire by April 1, 2025 will also get the opportunity to choose this option. This pension scheme provides benefits based on contributions instead of the defined benefit applicable to employees before NPS.

How is it different from NPS?

The employees’ contribution for UPS has been kept at the same rate as the current system of NPS at 10 percent, while the government has decided to increase its contribution from 14 percent to 18.5 percent. Along with this, Dearness Relief (DR) will be given at the same rate at which dearness allowance is given. In this way, half of the total salary pension will be given in UPS in proportion to the pension received under the old pension scheme.

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This pension scheme also has provisions for family pension, guaranteed minimum pension and lump sum payment after retirement. However, all these features are not available in NPS.

When will it be implemented?

The new scheme is effective from April 1, 2025. As soon as it is implemented, NPS account holders can opt for the Unified Pension Scheme i.e. UPS. By implementing UPS, the government will have to spend about Rs 800 crore in the current financial year as arrears, while about Rs 6250 crore will be spent for UPS.

What about family pension?

Similarly, if a pensioner dies, his family will get 60 percent of the pension received by the deceased at the time of death. DR of 60 percent will also be given on this. If someone leaves the job after working for a minimum of 10 years, then he will get a minimum pension of ten thousand rupees. Those who have worked for more years will get more pension in the same proportion.

What about gratuity?

Under UPS, apart from the gratuity amount, another lump sum amount will be given on retirement. This amount will be given on retirement by adding 10th part of the monthly salary (salary DA) for every six months of service.

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