WHICH PENSION SCHEMES ARE BENEFITED MOST UPS OR NPS

Cabinet approves Unified Pension Scheme (UPS) and agrees to introduce from April 1, 2025 as an alternative to the National Pension Scheme (NPS). NPS is little bit old concept. Under NPS employees contribute 10 per cent of their salary while the government contributes 14 percent. The money is invested in equities, government securities and corporate bonds. Under retirement 40 percent of the corpus must be annuitised.

The salient features of the UPS are:

1. Assured pension: 50% of the average basic pay drawn over the last 12 months prior to superannuation for a minimum qualifying service of 25 years. This pay is to be proportionate for lesser service period upto a minimum of 10 years of service.
2. Assured family pension: @60% of pension of the employee immediately before her/his demise.
3. Assured minimum pension: @10,000 per month on superannuation after minimum 10 years of service.
4. Inflation indexation: on assured pension, on assured family pension and assured minimum pension.

Dearness Relief based on All India Consumer Price Index for Industrial Workers (AICPI-IW) as in case of service employees

5. lump sum payment at superannuation in addition to gratuity

          1/10^th of monthly emoluments (pay + DA) as on the date of superannuation for every completed six months of service.This payment will not reduce the quantum of assured pension.

UPS merges element of defined contribution and defined benefit. Employees contribute 10 percent of their basic salary plus dearness allowance (DA) while the government contributes 18.5 percent of their basic salary plus DA.

CONCLUSION: how one decides what would be the right choice. Individuals comfortable with higher risks should stay with the NPS. For those who are risk averse and seek a defined benefit, UPS might be a superior option. Moreover an employee’s choice should be aligned with other his/her overall investments made in different class of assets.