Gajendra Singh Rathore : Aug 25, 2024, 05:21 PM
OPS vs NPS vs UPS : The central government has recently decided to implement the Unified Pension Scheme (UPS) in place of the New Pension Scheme (NPS). The government has announced that UPS will come into effect on April 1, 2024, benefiting approximately 2.3 million central employees. The goal of this new scheme is to provide a more secure and beneficial pension system for employees. However, the government has also made it clear that employees will have the option to choose between UPS and NPS. In this article, we will discuss the differences between UPS, NPS, and the Old Pension Scheme (OPS), and the benefits employees can expect from them.
Benefits of UPSAccording to Union Minister for Information and Broadcasting, Ashwini Vaishnaw, UPS will benefit 2.3 million central employees. If state governments also adopt this scheme, the number of beneficiaries could increase to 9 million. One of the key features of this scheme is that employees who retired after 2004 will receive arrears.
Under UPS, employees will receive a guaranteed pension, which will be 50% of the average basic salary of the last 12 months before retirement. To avail of this benefit, an employee must have served for at least 25 years. If an employee has served for less than 25 years but more than 10 years, they will receive a proportionally reduced pension.
60% Payment to Spouse After DeathUnder the UPS, in the event of a retired employee's death, their spouse will receive 60% of the total pension as family pension. This pension will be calculated based on the amount the employee would have received at the time of their death.
Minimum Pension ProvisionThe UPS also includes a provision for a minimum pension for central employees. If an employee has completed 10 years of service, they will be entitled to a pension of ₹10,000 per month. Additionally, the government will provide Dearness Relief (DR) instead of Dearness Allowance (DA), and the DR will be adjusted based on the Consumer Price Index.
What is the New Pension Scheme (NPS)?The New Pension Scheme (NPS) does not guarantee a fixed pension. Under NPS, 10% of an employee's basic salary and DA is deducted. The scheme's performance is tied to the stock market, making it less secure. To receive a pension after retirement, employees must invest 40% of their NPS fund. Furthermore, there is no provision for DA or inflation allowances under this scheme. Many employee unions have expressed dissatisfaction with NPS, as the government only contributes 10% of the basic salary.
NPS Employees Can Switch to UPS
The government has also clarified that employees who have already opted for NPS can switch to UPS. However, this option will be available only once.
What Was the Old Pension Scheme (OPS)?Under the Old Pension Scheme (OPS), government employees received a pension amounting to 50% of their salary at the time of retirement, without any deductions from their salary. Additionally, OPS included a provision for the General Provident Fund and provided for DA adjustments every six months. In case of the employee's death, their family would receive the pension. Moreover, OPS offered gratuity benefits up to ₹2 million.
Comparison Between UPS, NPS, and OPS1. Guaranteed Pension:
UPS provides a guaranteed pension, whereas NPS does not. OPS offered a pension amounting to 50% of the employee's salary.
2. Contribution:
Under NPS, 10% of the employee's basic salary and DA is deducted, while there is no such provision in UPS and OPS.
3. Dependence on Stock Market:
NPS is tied to the stock market, leading to uncertainty in pension amounts. UPS and OPS do not have such dependencies.
4. Arrears: UPS offers arrears to employees who retired after 2004, while there is no such provision in NPS or OPS.
5. Family Pension: Under UPS, the spouse of a deceased retired employee will receive 60% of the pension, while NPS does not have a clear provision for family pension. OPS also included a provision for family pension.
Benefits of UPSAccording to Union Minister for Information and Broadcasting, Ashwini Vaishnaw, UPS will benefit 2.3 million central employees. If state governments also adopt this scheme, the number of beneficiaries could increase to 9 million. One of the key features of this scheme is that employees who retired after 2004 will receive arrears.
Under UPS, employees will receive a guaranteed pension, which will be 50% of the average basic salary of the last 12 months before retirement. To avail of this benefit, an employee must have served for at least 25 years. If an employee has served for less than 25 years but more than 10 years, they will receive a proportionally reduced pension.
60% Payment to Spouse After DeathUnder the UPS, in the event of a retired employee's death, their spouse will receive 60% of the total pension as family pension. This pension will be calculated based on the amount the employee would have received at the time of their death.
Minimum Pension ProvisionThe UPS also includes a provision for a minimum pension for central employees. If an employee has completed 10 years of service, they will be entitled to a pension of ₹10,000 per month. Additionally, the government will provide Dearness Relief (DR) instead of Dearness Allowance (DA), and the DR will be adjusted based on the Consumer Price Index.
What is the New Pension Scheme (NPS)?The New Pension Scheme (NPS) does not guarantee a fixed pension. Under NPS, 10% of an employee's basic salary and DA is deducted. The scheme's performance is tied to the stock market, making it less secure. To receive a pension after retirement, employees must invest 40% of their NPS fund. Furthermore, there is no provision for DA or inflation allowances under this scheme. Many employee unions have expressed dissatisfaction with NPS, as the government only contributes 10% of the basic salary.
NPS Employees Can Switch to UPS
The government has also clarified that employees who have already opted for NPS can switch to UPS. However, this option will be available only once.
What Was the Old Pension Scheme (OPS)?Under the Old Pension Scheme (OPS), government employees received a pension amounting to 50% of their salary at the time of retirement, without any deductions from their salary. Additionally, OPS included a provision for the General Provident Fund and provided for DA adjustments every six months. In case of the employee's death, their family would receive the pension. Moreover, OPS offered gratuity benefits up to ₹2 million.
Comparison Between UPS, NPS, and OPS1. Guaranteed Pension:
UPS provides a guaranteed pension, whereas NPS does not. OPS offered a pension amounting to 50% of the employee's salary.
2. Contribution:
Under NPS, 10% of the employee's basic salary and DA is deducted, while there is no such provision in UPS and OPS.
3. Dependence on Stock Market:
NPS is tied to the stock market, leading to uncertainty in pension amounts. UPS and OPS do not have such dependencies.
4. Arrears: UPS offers arrears to employees who retired after 2004, while there is no such provision in NPS or OPS.
5. Family Pension: Under UPS, the spouse of a deceased retired employee will receive 60% of the pension, while NPS does not have a clear provision for family pension. OPS also included a provision for family pension.