Well, the Unified Pension Scheme, or the UPS is the
governments latest response to the backlash against the National Pension
Scheme, primarily due to its lack of fixed pension and
the uncertainty tied to the market linked investments.
So how does the new UPS compare to the old
pension scheme and the NPS and what does it mean
for the government employees?
Here's a quick breakdown.
The UPS guarantees a pension similar to the OPS.
If you have served at least 25 years, you will
receive 50% of your average basic pay from the last
12 months before your retirement.
Even with just ten years of service, you are assured
a minimum pension of one oh oh, oh oh rupees
per month.
This is a significant improvement over the NPS, which didn't
offer any fixed pension and was subject to market risks
as well.
One key difference between the OPS and the UPS is
that the latter still retains the contributory nature of the
NPS, but with added security.
Employees contribute 10% of their salary while the government adds
18.5%, which is higher than the 14% contribution made by
the government in the National Pension Scheme.
This means while you contribute, your returns are more substantial.
Here, the UPS also includes an inflation protection through the
All India Consumer Price Index for industrial workers.
Your pension keeps up with the cost of living, a
feature totally missing in NPS and managed via a dearness
allowance or DA.
In OPS.
For your family, the UPS offers a better support.
If a government employee passes away, their family will receive
60% of the pension.
This is generally higher than the 30 to 50% provided
by the OPS and certainly better than the NPS where
there was no fixed percentage of the deceased salary for
the family.
Now, regarding the lump sum payments, UPS provides a defined
lump sum payment based on a fraction of the salary
for every completed six months of service along with the
guaranteed pension.
NPS on the other hand, allows for a significant portion
of the accumulated corpus to be taken as lump sum,
but it involves market risks and requires the remaining portion
to be used for annuity purchase.
And OPS used to not provide any separate lump sum
except for the gratuity.
However, if you wanted to take a lump sum at
the time of your retirement, you could do that only
via commutation of your pension.
So in this regard UPS is a step up.
However there are some downsides as well.
Unlike the OPS, you still need to contribute under the
UPS and although the governments share is higher than the
NPS, it's not fully government funded like the OPS.
But in exchange, you're getting a more secure and predictable
pension than the NPS without putting the full financial burden
on the government like the OPS.
One thing that needs more clarity is the taxation.
A central government employee currently receives tax benefits for the
governments contribution to the NPS scheme, specifically, a 14% deduction
is available both under the old and the new regimes.
Since the OPS did not require employees contribution, there was
no associated tax benefit.
The government now needs to clarify whether contributions from both
the employee and the government under the new unified pension
scheme will qualify for any tax benefits.
So, in summary, EU PS aims to strike a balance
between the OPS and the NPS, offering a mix of
security and sustainability.