The Union Cupboard of India, led by Prime Minister Narendra Modi, accepted the Unified Pension Scheme (UPS) on August 24, 2024. This landmark determination introduces a brand new pension system geared toward offering enhanced monetary safety to authorities workers. The UPS stands as an alternative choice to the prevailing Nationwide Pension System (NPS) and the older, discontinued Previous Pension Scheme (OPS). This text delves into the main points of the UPS, highlighting its key options and the way it differs from the NPS and OPS.
Key Options of the Unified Pension Scheme (UPS)
1. Assured Pension:
Staff underneath the UPS will obtain a pension equal to 50% of their common fundamental wage over the past 12 months earlier than retirement. To be eligible, workers will need to have accomplished a minimal of 25 years of service. These with fewer years will obtain a proportionally adjusted quantity.
2. Household Pension:
In case of the pensioner’s demise, their household will obtain 60% of the pension quantity that was being disbursed on the time of his demise.
3. Minimal Assured Pension:
The scheme ensures a minimal pension of ₹10,000 monthly for retirees who’ve accomplished at the very least 10 years of service.
4. Inflation Indexation (Dearness Reduction):
Pension quantities, together with household pensions, will probably be adjusted for inflation, guaranteeing that the worth of the pension retains tempo with rising dwelling prices.
5. Lumpsum Cost:
On the time of retirement, workers will obtain a lump sum cost along with gratuity. It’s 1/tenth of the month-to-month wage (fundamental pay + DA) for each 6 months of accomplished service. This lump sum cost doesn’t cut back the assured pension.
Implementation
The UPS is about to be carried out on April 1, 2025 and is anticipated to profit round 23 lakh central authorities workers. Staff presently underneath the NPS could have the choice to modify to the UPS, and this alternative will probably be closing. The scheme can also be open to adoption by state governments, which may probably lengthen its advantages to tens of millions extra authorities workers.
Evaluating UPS, NPS, and OPS
Allow us to evaluate UPS with the prevailing NPS and the older OPS on the next parameters.
1. Pension Calculation:
- OPS offered a set pension quantity calculated as 50% of the final drawn fundamental wage.
- The pension quantity in NPS is market-linked and varies primarily based on funding efficiency. There isn’t any assured pension underneath NPS. Upon retirement, workers can withdraw a portion of the corpus as a lump sum, whereas the remaining quantity should be used to buy an annuity, which offers an everyday pension.
- UPS brings again the idea of a assured pension.
2. Authorities contribution:
- OPS was fully funded by the federal government and was out there to workers who joined service earlier than 2004. No wage deductions have been made for pension contributions.
- The Nationwide Pension System, launched in 2004, is an outlined contribution scheme. The federal government contributes 14% of the worker’s wage to the pension fund, whereas the worker contributes 10%.
- The federal government’s contribution underneath the UPS has been elevated to 18.5%, offering a greater stage of help in comparison with the NPS. Worker contributions stay the identical as underneath NPS.
3. Inflation safety:
- In OPS, pensions have been adjusted periodically primarily based on inflation.
- NPS provides no direct inflation safety; pension is dependent upon the efficiency of the funding portfolio.
- UPS takes into consideration the affect of inflation.
4. Alternative and adaptability:
- No alternative was supplied; all eligible workers have been robotically enrolled in OPS.
- Staff have the flexibleness to decide on their pension fund managers and funding choices inside NPS, however they’re topic to market dangers.
- Staff have the one-time option to choose between NPS and UPS.
5. Household Pension:
- Below OPS, a household pension was offered to the partner or eligible relations of the pensioner.
- NPS doesn’t have a devoted household pension plan; nonetheless, the remaining corpus will be transferred to the nominee upon the demise of the subscriber.
- UPS: In case of the pensioner’s demise, the household receives 60% of the pension.
The desk under provides an in depth comparability between the three schemes.
| Characteristic | Previous Pension Scheme (OPS) | Nationwide Pension System (NPS) | Unified Pension Scheme (UPS) |
| Pension Sort | Outlined Profit | Outlined Contribution | Outlined Profit |
| Worker Contribution | None | 10% of Fundamental + DA | 10% of Fundamental + DA |
| AuthoritiesContribution | Full Funding | 14% of Fundamental + DA | 18.5% of Fundamental + DA |
| Pension Assure | Sure | No | Sure |
| Market Danger | None | Sure | No |
| Inflation Adjustment | Sure | No | Sure |
| Household Pension | Sure | No (corpus to nominee) | Sure (60% of pension) |
| Minimal Pension | Not specified | No | ₹10,000 monthly |
| Lump-Sum Cost | Gratuity | Partial Withdrawal | Lump-Sum + Pension |
Conclusion
The Previous Pension Scheme (OPS) offered a dependable and predictable retirement profit however was financially unsustainable for the federal government. It posed a big monetary burden on the federal government because of the assured advantages and inflation changes. The Nationwide Pension System (NPS) addressed these considerations by shifting the chance to the worker and linking pensions to market efficiency. However NPS was criticized by a number of authorities workers for the dearth of assuredness within the pension payout. Therefore, UPS may probably provide the most effective of each worlds, guaranteeing monetary safety for workers whereas additionally addressing the federal government’s long-term fiscal challenges.