UNIFIED PENSION SCHEME ( UPS )
UNIFIED PENSION SCHEME
SENIOR CITIZENS - Guidance for Golden Age :
We have , over the years , published various articles relating to the needs of Senior citizens relating to investment , health , insurance and Financial planning . Some of the articles with links are
1. On Financial Planning : Long term retirement Planning for the young
2. On Health Insurance : SENIORS HEALTH INSURANCE
3. On Investment :
Senior Citizens Savings Scheme
2. INVESTMENT OPTIONS FOR SENIOR CITIZENS
4. On Health : Planning beyond Finance
5. For bank retirees BANK PENSIONERS NEWS
6. On on-line submissions of Life Certificates for pensioners : LIFE CERTIFICATE
Apart from the above articles , we have received contributions from various readers , especially from USA , requesting us to publish articles / links to articles which are useful to senior citizens . Synopsis to such articles / links can be found below . However we have not verified the accuracy or veracity of the facts in the articles . We hope the articles will be generally useful to senior citizens , especially from USA
CABINET APPROVES UNIFIED PENSION SCHEME FOR THE GOVERNMENT EMPLOYEES :
The Union Cabinet, chaired by the Prime Minister Shri Narendra Modi, today approved the Unified Pension Scheme (UPS).
The salient features of the UPS are:
1 . Assured pension: 50% of the average basic pay drawn over the last 12 months prior to superannuation for a minimum qualifying service of 25 years. This pay is to be proportionate for lesser service period upto a minimum of 10 years of service.
Assured family pension: @60% of pension of the employee immediately before her/his demise.
Assured minimum pension: @10,000 per month on superannuation after minimum 10 years of service.
4 Inflation indexation: on assured pension, on assured family pension and assured minimum pension
5 . Dearness Relief based on All India Consumer Price Index for Industrial Workers (AICPI-IW) as in case of service employees
Lump sum payment at superannuation in addition to gratuity
. 1/10th of monthly emoluments (pay + DA) as on the date of superannuation for every completed six months of service this payment will not reduce the quantum of assured pension
REF : PIB Press release dated 24.08.2024
News media report : Who Can Join UPS?
Under the UPS, there will be a provision of a fixed assured pension, unlike the New Pension Scheme (NPS) which does not promise a fixed pension amount. Central government employees will have a right to decide to stay in the New Pension Scheme (NPS) or join the Unified Pension Scheme (UPS),
During a media briefing , Cabinet Secretary Designate T V Somanathan also said, “This will also apply to all those who have already retired under the NPS from 2004 onwards. Though the new scheme will take effect from April 1, 2025, everybody who has retired under NPS from the time of its inception and also including those retiring till March 31, 2025, will also be eligible for all these five benefits of the UPS. They will get arrears of the past after adjusting whatever they have withdrawn.”
To know about present NPS scheme and difference between the two schemes , go through the below article
What is New Pension scheme ( NPS ) :
The New Pension Scheme (NPS), now known as the National Pension System (NPS), is a government-backed retirement savings scheme in India.
It was introduced in 2004 to replace the old defined benefit pension system.
Key features of NPS:
Defined Contribution: It's a defined contribution scheme, meaning the pension amount depends on the contributions made by the subscriber and the returns earned on those investments.
Tiered Structure: NPS has two tiers:
Tier I: Mandatory for all government employees and is primarily for retirement savings.
Tier II: Voluntary and offers more flexibility in investment choices.
Market-Linked Investments: NPS invests in a variety of asset classes, including equity, corporate bonds, government securities, and alternative investments.
PFRDA Regulation: The Pension Fund Regulatory and Development Authority (PFRDA) regulates and supervises NPS.
Tax Benefits: NPS offers tax benefits under various sections of the Income Tax Act.
Benefits of NPS:
Long-term Savings: It's a suitable option for long-term retirement planning.
Diversification: Investing in various asset classes helps mitigate risk.
Professional Management: NPS is managed by professional pension fund managers.
Government Guarantee: The government guarantees the safety of principal contributions.
Who can join NPS:
Government Employees: Central and state government employees (except armed forces) are mandated to join NPS.
Corporate Employees: Companies can offer NPS to their employees as a retirement benefit.
Individual Subscribers: Indian citizens aged 18-70 can join NPS as individual subscribers.
Recent Developments:
Unified Pension Scheme (UPS): The government has announced a new pension scheme, UPS, for central government employees, which will offer a guaranteed monthly pension of 50% of the average basic pay drawn in the last 12 months of service, subject to completing 25 years of service. This scheme is expected to come into effect in April 2025.
For more information, you can visit the official NPS website:
DIFFERENCE BETWEEN NPS AND UPS :
FEATURE
PENSION TYPE
INVESTMENT RISK
PENSION GUARANTEE
ELIGIBILITY
NPS
Defined Contribution
Market-Linked
NO
Government employees, corporate employees, individual subscribers
UPS
Defined Benefit
Government-Funded
YES
Government employees who who are retired or retiring up till March 31, 2025
In summary, NPS offers a market-linked approach with potential for higher returns but also involves investment risks, while UPS provides a guaranteed pension amount but is limited to government employees who joined service after a specific date. The choice between NPS and UPS depends on individual preferences and risk tolerance.
While Government employees / pensioners were demanding that the pension scheme may be returned to the Old Pension Scheme ( OPS ) , the present government has brought the new UPS plan . Then , what is the difference between OPS and UPS ?
DIFFERENCE BETWEEN OPS AND UPS :
Pension Calculation
OPS: The pension is calculated based on the last drawn basic salary and dearness allowance.
UPS: The pension is calculated based on the average basic salary and dearness allowance over the last 12 months of service.
Employee Contribution
OPS: Employees do not contribute to the pension fund.
UPS: Employees contribute a portion of their salary to the pension fund.
Minimum Pension
OPS: The minimum pension is higher under OPS.
UPS: The minimum pension is lower under UPS.
Lumpsum Payment
OPS: There is no provision for a lumpsum payment.
UPS: There is a provision for a lumpsum payment.
Tax Benefits
OPS: The pension is generally tax-exempt.
UPS: The pension may be subject to tax.
In essence, OPS offers a more assured pension, while UPS provides flexibility and potential for higher returns. The choice between the two depends on individual preferences and financial goals.
Note: The specific details and rules of these schemes may vary over time. It's always advisable to consult with a financial advisor or government pension authority for the most accurate and up-to-date information.