How Is New ‘Unified Pension Scheme’ Different From NPS? Key Differences Explained

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New Delhi: The central government introduced the Unified Pension Scheme (UPS) which is designed to offer better retirement security for government employees. Information and Broadcasting Minister Ashwini Vaishnaw announced that under this new scheme employees will receive an “Assured Pension” equal to 50 per cent of their average basic pay from the last 12 months before they retire. Employees must have at least 25 years of service to qualify for this full pension.

Key Differences Between the Unified Pension Scheme (UPS) and the National Pension Scheme (NPS)

Unified Pension Scheme (UPS):

-  Pension Amount: Retirees receive 50 per cent of their average basic pay from the last 12 months of service if they have at least 25 years of service. For those with 10 to 25 years of service, the pension is proportionate to their service duration.

- Effective Date: The scheme starts on April 1, 2025. Benefits apply to those retiring by March 31, 2025, including any arrears.

- Minimum Pension: Guarantees a minimum pension of Rs 10,000 per month for employees with at least 10 years of service, providing basic financial security.

- Employee Contribution: No individual contributions required from employees; it is a defined benefit model based on salary and service length.

- Family Pension: In the event of death, the family receives 60 per cent of the employee's pension, ensuring ongoing support.

- Eligibility: Applies mainly to employees with longer service tenures.

National Pension System (NPS):

- Pension Amount: Pension is based on returns from investments in debt and equity. There is no guaranteed fixed amount; it depends on market performance.

- Employee Contribution: Employees contribute 10 per cent of their basic salary, with the government matching 14 per cent.

- Minimum Pension: No guaranteed minimum pension; benefits depend on the accumulated corpus and annuity plan.

- Account Structure:

Tier-1 Account: Mandatory pension account with tax benefits.

Tier-2 Account: Optional investment account with flexible withdrawals.

- Family Pension: Depends on the accumulated corpus and chosen annuity plan at retirement.

- Eligibility: Applies to government employees who joined after April 1, 2004.