The Unified Pension Scheme (UPS) is a new central pension scheme announced by the Narendra Modi government last year. The scheme, to be rolled out from April 1, aims to give a fixed pension security to government employees. This scheme under the National Pension System (NPS) is primarily designed for central government employees, but in the future, it can also be extended to state government employees.
If you are in a government job and are already in the NPS, then you will get the option to choose UPS.
Under UPS, if you have worked for at least 25 years, you will get 50% of the average basic salary of the last 12 months before retirement as a pension. If your service is more than 10 years, you will get a pension of at least Rs 10,000 per month.
In case the pensioner dies, the family will get 60% of the last pension as a family pension.
Also read: Unified Pension Scheme roll-out from April 1: How it differs from NPS and old pension scheme
What is the National Pension System (NPS)?
In 2004, the government discontinued the Old Pension Scheme (OPS) and introduced the NPS. Initially, it was only for government employees, but in 2009, it was opened to all citizens, NRIs, self-employed, and unorganised sector workers.
How does NPS work?
Employees get a fixed amount deducted from their salary and invest it in market-based investment schemes.
At the time of retirement, 60% of the invested funds can be withdrawn in a lump sum, and the remaining 40% has to be mandatorily invested in an annuity, which gives you a monthly pension.
Unlike OPS, the NPS gives no guarantee of any fixed amount as a pension, and the amount depends entirely on the performance of the stock market and other investments.
What was the Old Pension Scheme?
Before NPS, government employees used to get a pension after retirement under the Old Pension Scheme.
Under OPS, all government employees used to get a pension based on their last salary. It was fully funded by the government—that is, the employee did not have to make any contribution. Under the old pension system, there was a facility to increase dearness allowance (DA) twice every year.
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