The Unified Pension Scheme (UPS) is a new pension scheme introduced by the Indian government for its employees. It provides a guaranteed pension of 50% of the average basic pay drawn over the last 12 months for employees with at least 25 years of service. The government contributes 18.5% to the scheme, and employees contribute 10%.
Read morePeaceful Post-Retirement Life
Tax Free Regular Income
Wealth Generation to beat Inflation
Invest ₹6,000/month & Get Tax Free Monthly Pension of ₹60,000
Get the best returns & make the most of your Golden years
The Unified Pension Scheme (UPS) is a new pension scheme introduced by the Indian government for its employees, effective from April 2025. This scheme is a significant departure from the existing National Pension Scheme (NPS) and offers a fixed pension amount to employees after a minimum of 25 years of service. UPS ensures retirees receive a guaranteed and predetermined sum regularly after retirement.
Pension plans in India are investment products designed to provide a regular income after retirement. They offer a secure way to save for your post-retirement life. There are various types of pension plans available, including government-sponsored schemes like the Unified Pension Scheme (UPS), National Pension System (NPS) and private insurance-based plans.
The Unified Pension Scheme (UPS) will be implemented from April 1, 2025. This means that all Central government employees who join the service on or after this date will automatically be enrolled in the UPS.
Below are the features of the Unified Pension Scheme (UPS):
Fixed Pension: Employees will receive a fixed pension of 50% of their average basic pay drawn over the last 12 months before superannuation, provided they have completed a minimum of 25 years of service.
Pro-rata Pension: For those with less than 25 years of service, the pension will be proportionate to the number of years served, with a minimum of 10 years required for eligibility.
Family Support: In case of the employee's demise, their family members will be entitled to a family pension of 60% of the employee's pension immediately before their death.
Safety Net: Employees who complete a minimum of 10 years of service will be guaranteed a minimum pension of Rs. 10,000 per month upon superannuation.
Purchasing Power Protection: To protect the pension from inflation, the assured pension, assured family pension, and assured minimum pension will be indexed to the All India Consumer Price Index for Industrial Workers (AICPI-IW).
Cost of Living Adjustment: Employees will receive dearness relief based on the AICPI-IW, similar to the benefits provided to other government employees.
Additional Benefit: In addition to gratuity, employees will be eligible for a lump sum payment at superannuation. This payment will be calculated as 1/10th of their monthly emoluments (pay + DA) for every six months of service completed.
Also Read: Pension Plan in India
New Joiners: Employees who join the Central government service on or after April 1, 2025 will automatically be enrolled in the Unified Pension Scheme (UPS).
Existing Employees: Employees who joined the service before April 1, 2025, can voluntarily opt for the UPS.
Pension Eligibility: To be eligible for a pension, employees must complete a minimum of 10 years of qualifying service.
Assured Minimum Pension: Employees with at least 10 years of qualifying service are guaranteed an assured minimum pension of Rs. 10,000 per month.
The Unified Pension Scheme (UPS) offers a straightforward method for calculating the pension amount.
Pension Calculation Formula:
Base Pension: 50% of the average basic pay drawn in the last 12 months before retirement.
Dearness Allowance (DA): The base pension will be adjusted for inflation through regular updates in the dearness allowance.
You can also use the NPS calculator to help government employees calculate the returns on their investments in the pension scheme.
The Unified Pension Scheme (UPS) guarantees a minimum pension of Rs. 10,000 per month to employees who complete at least 10 years of qualifying service. This ensures a basic level of financial support for employees with shorter service periods.
You cannot switch from the Unified Pension Scheme (UPS) to the National Pension Scheme (NPS) once you have chosen the UPS. The government has made it clear that the choice between UPS and NPS is final. While existing NPS/VRS employees and future employees have the option to join UPS, once they make their choice, they cannot change their mind.
Here's a comparison of the key differences between the two:
Feature | Unified Pension Scheme (UPS) | National Pension Scheme (NPS) |
Eligibility | Central government employees who joined service after January 1, 2004 | Any Indian citizen between the ages of 18 and 70 |
Pension Type | Defined benefit scheme (guaranteed pension) | Defined contribution scheme (pension based on contributions and market performance) |
Pension Amount | 50% of the last drawn basic salary | Depends on the accumulated corpus and chosen annuity plan at retirement |
Government Contribution | 18.5% of the basic salary | 14% of the basic salary (matched with employee's contribution) |
Family Pension | 60% of the employee's pension | Depends on the accumulated corpus and chosen annuity plan at retirement |
Risk | Lower risk due to guaranteed pension | Higher risk due to market-linked returns |
Portability | Not applicable (restricted to central government employees) | Portable, allowing account transfer across employers and locations |
Tax Benefits | Not yet specified | Tax benefits under Section 80CCD of the Income Tax Act |
The Unified Pension Scheme (UPS) offers a significant improvement over previous pension schemes, providing government employees with a guaranteed pension, family pension, and inflation-indexed benefits. While it may involve some trade-offs in terms of potential returns compared to market-linked options, UPS offers a secure and reliable retirement income.
*All savings are provided by the insurer as per the IRDAI approved insurance
plan.
*Tax benefit is subject to changes in tax laws. Standard T&C Apply
^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.
†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
+Returns Since Inception of LIC Growth Fund
~Source - Google Review Rating available on:- http://bit.ly/3J20bXZ
^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.
19 Sep 2024
In India, the government provides several retirement plans12 Sep 2024
Tata AIA Saral Pension Plan is a retirement solution that offers10 Sep 2024
Reliance Life Saral Pension is a retirement plan designed to10 Sep 2024
PNB MetLife Immediate Annuity Plan is a retirement solution that22 Aug 2024
The Voluntary Retirement Scheme (VRS) is a strategic initiativeInsurance
Calculators
Policybazaar Insurance Brokers Private Limited CIN: U74999HR2014PTC053454 Registered Office - Plot No.119, Sector - 44, Gurugram - 122001, Haryana Tel no. : 0124-4218302 Email ID: enquiry@policybazaar.com
Policybazaar is registered as a Composite Broker | Registration No. 742, Registration Code No. IRDA/ DB 797/ 19, Valid till 09/06/2027, License category- Composite Broker
Visitors are hereby informed that their information submitted on the website may be shared with insurers.Product information is authentic and solely based on the information received from the insurers.
© Copyright 2008-2024 policybazaar.com. All Rights Reserved.