The Unified Pension Scheme (UPS) will be introduced by the central government from April 1, 2025, for employees covered under the National Pension System (NPS).
Unlike NPS, which depends on stock and debt market performance, UPS offers a guaranteed monthly pension after retirement, with a minimum payout of ₹10,000 per month.
Key Details About UPS
Once an NPS-covered employee opts for UPS, they cannot switch back to NPS.
The pension is calculated using a fixed formula, ensuring a stable income post-retirement.
Formula to Calculate Pension
Payout=50%×(Sum of last 12 months’ basic pay12)\text{Payout} = 50\% \times \left(\frac{\text{Sum of last 12 months’ basic pay}}{12}\right)
If an employee has 25 years or more of service, this formula applies fully.
If the remaining service is less than 25 years, the payout is calculated in proportion to the service years completed.
If an employee opts for voluntary retirement after 25 years, the payout starts from the original retirement date.
Examples of Pension Calculation
1. Full Pension (Service: 25 years or more)
If an employee’s average basic pay at retirement is ₹12,00,000, the monthly average is: ₹12,00,00012=₹1,00,000\frac{₹12,00,000}{12} = ₹1,00,000
Pension = 50% of ₹1,00,000 = ₹50,000 per month
2. Proportionate Pension (Service: Less than 25 years)
If an employee retires after 20 years instead of 25, the proportion factor is: 20/25=0.820/25 = 0.8
Pension = 50% × ₹1,00,000 × 0.8 = ₹40,000 per month
3. Minimum Assured Pension
If an employee’s basic pay at retirement is ₹15,000, their calculated payout would be: 50%×₹15,000=₹7,50050\% \times ₹15,000 = ₹7,500
Since ₹7,500 is below the ₹10,000 minimum, they will receive ₹10,000 per month as a guaranteed pension.
With UPS, employees can secure a stable and predictable pension after retirement.
Those opting for this scheme should carefully evaluate their choices, as switching back to NPS will not be possible.
