Unified Pension Scheme: In a significant approach to integrate the pay system and betterment of govt employees, the Central Govt of India finally approved the New Pension Scheme as UPS Scheme or Unified pension scheme on August 24, 2024. The UPS Scheme or the new pension system has been named ‘Unified Pension Scheme’ as it aims to improve the old pension system or OPS by making some major changes in it.
Though the govt decided to launch the new system of pension much before, it was a debated issue among the employees for so long. Some thought that the NPS would deprive them of some benefits of the OPS, while a few others were in support of the NPS. But now the govt has officially announced to launch the new UPS despite all controversies and it is set to come into effect from April 1, 2025. According to the official data, the new UPS system will affect salaries of 23 lakh Government Employees. Will it be really benefiting for them, or they will suffer? Let’s explain below.
Key Features of the Unified Pension Scheme (UPS):
Assured Pension
Employees with at least 25 years of service will receive a pension equal to 50% of their average basic pay over the last 12 months before retirement. For those with less than 25 years of service, the pension will be proportionate to their years of service, with a minimum qualifying period of 10 years.
Assured Family Pension
In the event of an employee’s death, their spouse will receive a family pension set at 60% of the pension the employee was drawing before their death.
Minimum Pension Guarantee
The UPS guarantees a minimum pension of ₹10,000 per month for employees who have completed at least 10 years of service.
Inflation Indexation:
Pensions under the UPS Pension, including both the assured pension and family pension, will be adjusted for inflation based on the All India Consumer Price Index for Industrial Workers (AICPI-IW).
Dearness Relief (DA and DR)
Retirees under the UPS will receive Dearness Relief similar to serving employees, based on the AICPI-IW.
Lump Sum Payment on Superannuation:
Upon retirement, employees will receive a lump sum payment in addition to gratuity. This payment will be 1/10th of the employee’s monthly emoluments (including pay and Dearness Allowance) for every completed six months of service. This payment does not reduce the amount of the pension.
Contributory Model:
Unlike the OPS, the UPS Scheme requires employees to contribute 10% of their salary towards the pension fund, with the government contributing 18.5%.
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Difference Between the OPS and UPS
Pension Structure – OPS vs UPS
- OPS: Provided a defined benefit pension equal to 50% of the last drawn salary, fully funded by the government with no contributions from employees.
- UPS: Offers a similar pension of 50% of the average basic pay over the last 12 months before retirement but introduces a contributory model where employees contribute 10% of their salary, and the government contributes 18.5%.
Minimum Pension:
- OPS: Did not specify a minimum pension amount, though retirees typically received 50% of their last drawn salary, often exceeding ₹10,000.
- UPS: Guarantees a minimum pension of ₹10,000 per month for employees with at least 10 years of service.
Family Pension:
- OPS: Offered a family pension, generally at a lower percentage of the employee’s pension.
- UPS: Provides a more generous family pension, ensuring 60% of the employee’s pension for the spouse.
Inflation Protection:
- OPS: Included dearness relief to adjust for inflation but lacked a standardized method.
- UPS: Ensures robust inflation protection through adjustments based on the AICPI-IW, offering more consistent and reliable inflation adjustments.
Financial Responsibility:
- OPS: Entirely government-funded, which placed a significant financial burden on the state.
- UPS: Shares financial responsibility between the government and employees, with a contributory model to balance the financial load.
Lump Sum Payment:
- OPS: Provided gratuity but did not include an additional lump sum payment upon retirement.
- UPS: Includes a lump sum payment in addition to gratuity, providing additional financial support at retirement.
Conclusion
There is a big question arising among the Govt Employees that, NPS vs UPS or OPS vs UPS Which is Better. But it is not possible to describe in a on sentence that which is better, in a single sentence. To conclude the answer, we have to wait more time to observe and calculate and implementation of Unified pension scheme. What do you think? You can share your opinions.
