UPS vs NPS vs OPS: How the three pension schemes stack up against one another

In a major benefit for 23 lakh central government employees, the Modi government has introduced a new Unified Pension Scheme (UPS), that assures a pension of 50% of the basic salary for those who joined the service after January 1, 2004, under the National Pension System (NPS). This new scheme will take effect from April 1, 2025. NPS subscribers now have the option to switch to UPS, which provides this assured pension starting from the next financial year.

The government’s plan to transform NPS came against the backdrop of several non-BJP states deciding to revert to the DA-linked Old Pension Scheme (OPS) and employee organisations in some other states raising demand for the same.

Here’s how UPS, NPS, and OPS will stack up;

UPS: Unified Pension Scheme

Assured Pension:

• 50% of the average basic pay drawn over the last 12 months prior to superannuation.
• Applicable for a minimum qualifying service of 25 years.
• Proportional for service periods between 10 and 25 years.

Assured Family Pension:

• 60% of the employee’s pension immediately before their demise.

Assured Minimum Pension:

• Rs 10,000 per month upon superannuation after a minimum of 10 years of service.

Inflation Indexation:

• Applied to assured pension, assured family pension, and assured minimum pension.

Dearness Relief:

• Based on All India Consumer Price Index for Industrial Workers (AICPI-IW), similar to service employees.

Lump Sum Payment at Superannuation:

• 1/10th of monthly emoluments (pay + DA) for every completed six months of service.
• This lump sum payment is in addition to gratuity and does not affect the assured pension amount.

NPS: National Pension Scheme

1. NPS promised pensions based on the contributions made by employees and the government.
2. It required a 10-per cent contribution from the central government employee’s basic salary and 14 per cent contribution from the government.
3. In, UPS the employee’s contribution would remain 10 per cent, while the government contribution would increase to 18.5 per cent.

The pension amount is not fixed in NPS as it is a market-linked scheme and is subject to market movements. The UPS provides an assured pension, which is 50% of the salary for those who joined the service after January 1, 2004.

The family pension under NPS depended on the accumulated corpus in the pension fund and the annuity plan chosen at retirement.

• For govt and private employees

NPS has been implemented for all government employees except those in the armed forces joining the central government on or after January 1, 2004. It is also available for private-sector employees.Most state/Union Territory governments have also notified NPS of their new employees. If the state government joins UPS, they would bear the additional burden for those employees for the assured pension.

Old Pension Scheme

• In OPS retired government employees received 50 per cent of their last drawn salary as monthly pensions.
• The amount keeps increasing with the hike in the DA rates.
• Employees were entitled to a gratuity payment of a maximum of Rs 20 lakh on retirement
• In cases if a retired employee passes away, their family receives continued pension benefits
• Also no deductions are made from an employee salary towards pensions contributions under OPS unlike NPS
• States like Himachal Pradesh, Rajasthan, Chhattisgarh, and Punjab have reverted to the Old Pensions Scheme (OPS).