The central government, led by Prime Minister Narendra Modi, has introduced a significant new option for government employees regarding their pensions.
Many government employees who were unhappy with the National Pension Scheme (NPS) will benefit from this new option, called the Unified Pension Scheme (UPS).
The government announced this scheme as an alternative to NPS, offering more choices for employees.
UPS is Optional, Not Default
Unlike the National Pension Scheme, which replaced the old pension scheme (OPS) two decades ago as the default option,
the Unified Pension Scheme is not a default scheme.
Instead, it is an option that eligible government employees can choose between NPS and UPS according to their preference.
Background: The OPS vs. NPS Debate
The debate between the old pension scheme (OPS) and the National Pension Scheme (NPS) has played a significant role in the introduction of UPS.
A portion of government employees had been demanding the return of OPS for some time.
This issue became a key topic during the Lok Sabha elections, with some state governments even moving away from NPS and reinstating OPS.
UPS Benefits: Pension and Gratuity
The Unified Pension Scheme (UPS) offers guaranteed benefits for government employees, particularly in terms of pension.
Employees who have worked for at least 25 years will receive a pension equal to half of their basic salary
calculated based on their average salary in the last 12 months before retirement.
For those who have worked between 10 and 25 years, the pension will be calculated proportionally.
A minimum guaranteed pension of Rs 10,000 per month is assured for those with at least 10 years of service.
The scheme also includes a family pension, which will be 60 percent of the pensioner’s last payment.
Additionally, the UPS provides for a lump sum payment along with gratuity, calculated based on the duration of service.
Balancing UPS with OPS and NPS
The Unified Pension Scheme combines elements of both the old pension scheme (OPS) and the National Pension Scheme (NPS).
Like OPS, UPS guarantees 50 percent of the last salary as a pension. Unlike NPS, which bases pension amounts on contributions, UPS provides assured benefits.
The scheme also retains the provision for gratuity and introduces a new provision for a lump sum payment similar to the General Provident Fund (GPF) available under OPS.
Overall, the UPS aims to provide a balanced approach, offering government employees a more flexible and guaranteed pension option compared to NPS.
