Unified Pension Scheme (UPS): Does it really beneficial for an employee or not?

Recently central government has approved the Unified Pension Scheme (UPS) and it will going to be applicable and available as an option to NPS (National Pension Scheme) from next financial year that is 1st of April 2025.

But the major question most government employees has that is it really beneficial for the employee and is not some fishy scheme to trap our hardworking employees?

To answer this let’s understand what is UPS Pension Scheme or Unified Pension Scheme:

What is Unified Pension Scheme (UPS)?

Firstly, if you are an employee working in a private sector then this scheme is not valid for you, it is available only for government employees.

Unified Pension Scheme unlike NPS provide an assurance of 50% pension of your basic salary to all the Government employees who joined after 1st of January 2004.

The calculation of this 50% pension the employee will get at the time of retirement is based on the average basic salary + DA drawn in the previous 12 months before superannuation. This would mean that government employees, at retirement, will get 50% of the average of the last 12 months’ salary + DA and this is the promise of the UPS Pension Scheme.

But the only condition here is that you will get 50% of the average basic salary only if you have served for minimum 25 years.

If you have served for less then 25 years then assured percentage of basic salary will also decrease as per that but the minimum criteria for Unified Pension Scheme is of 10 years.

With that UPS Pension Scheme provide an assured minimum pension of ₹10,000 for every employee who served for minimum 10 years.

Wait there is more for you in this scheme, there is also an assured family pension in case the employee dies in any circumstances then the family will also get the pension but then it will be reduced to 60% of the pension that employee may get.

There will be an inflation indexation in all three cases and also an employee will get lump sum payment at superannuation in addition to gratuity & this amount is calculated like this
(1/10th of last drawn monthly salary including dearness allowance (pay + DA) as on the date of superannuation for every completed six months of service)

Old Pension Scheme (OPS) Vs National Pension Scheme (NPS) Vs Unified Pension Scheme (UPS)

I know that you must have a doubt that whether this unified pension scheme is same as Old Pension Scheme and if that’s not the case then how all three are different

Old Pension Scheme: This scheme was brought by indian government before 2004 where all the contribution is done by government itself without any employee contribution.

National Pension Scheme: This scheme was introduced by indian government back in 2004 where the contribution is done by both government and employee.

Under NPS an employee contributes 10% of his salary while government contributes 14% of the salary of that employee.

Unified Pension Scheme: This scheme will be available from 1st April 2025 and in this the contribution by an employee is not changing, that means the employee will have to contribute only 10% of his salary but the contribution done by government is increased from 14% to 18.5%.

Also, under UPS Pension Scheme of India after every 3 years there will be a review done by government where they will think about increasing the contribution done by the government without changing the contribution percentage done by an government employee.

Already Opted For National Pension Scheme?

There can be a doubt in your mind that what you can do if you have already opted for National Pension Scheme (NPS).

Well, in such cases you can stay relaxed as Government of India is providing you full flexibility of opting any from NPS or UPS as per what will proved to be most beneficial in your case.

If you want you can carry on with your current NPS Pension Scheme or if you wanted to switch it then from next financial year that is 1st of April 2025 you can switch it to UPS Pension Scheme.

As per the government for 90% of employee the Unified Pension Scheme will be most beneficial.

What if You Already Got Retired Under NPS Scheme?

One more question can arise what if you have already got retired under NPS Scheme of 2004 so is there any option of switching to UPS Scheme?

Well, be relaxed Central Government also, thought about this and they providing an option where you can still switch it into UPS Scheme.

Under this circumstance you will be going to receive the arrear, with that you will be also going to get the interest on this arrear and the interest on PPF will going to be paid to you.