What is Unified Pension Scheme?
The Indian Government has recently approved a new retirement benefit plan for central government employees that is called to be the Unified Pension Scheme (UPS).
This scheme is a mix of both the Old Pension Scheme (OPS) and the National Pension Scheme (NPS), so that employees can be provided with more amount of stability and security in post-retirement life.
What are the key features of UPS?
- Assurance of the Pension: 50% of the average basic pay (last 12 months) for more than 25 years of service.
- Minimum Pension: ₹10,000 every month for,more than10 years of service.
- Family Pension: 60% of the pension is given to the family if in case employee dies.
- Inflation Protection: Pension adjusts with inflation so that value of the pension does not deflate with time passing i.e(Dearness Relief).
- Lump Sum: Extra amount of payment to employees at time they retire i.e based on there service length.
Unified Pension Scheme Calculator(Step-by-Step)
Step 1: Know your Average Basic Salary
- Lets say your basic pay (without allowances) for the last 10 months of your job before the retirement.
- Let’s say it’s ₹50,000 per month.
Step 2:Know your work time.
- For example, you worked for 25 years.
Step 3: Use the formula
- So If you worked 25 years or more:
Monthly Pension = Average Basic Salary × 50%
So, if your salary was ₹50,000:
so ₹50,000 × 50% = ₹25,000 per month pension is what you will be getting.
- And if you worked less than 25 years.
Let’s say you worked 20 years and your average salary was ₹50,000.
Then use this formula:
Monthly Pension = (₹50,000 × 50%) × (20 ÷ 25)
= ₹25,000 × 0.8 = ₹20,000 per month
Family Pension (after employees death):
Family gets 60% of there pension:
- If your pension was ₹25,000 → Family gets ₹15,000/month
- and if pension is ₹20,000 – then family gets ₹12,000/month
UPS Pension Scheme in India: Who Will Benefit?
- The central government employees who have joined after year 2004.
- Some info is that this ups is to be extended for state government employees in future as well.
- If you have worked at least for a period 10 years, so you’re eligible for minimum pension of ₹10,000/month.
- The more you have given your services (up to 25 years or more), the higher your pension will be.
- And is extremely beneficial for UPSC aspirants joining central services after 2025.
Eligibility for the UPS
- Government employees who have joined on or after 1 Jan 2004.
- Must be under the National Pension System (NPS).
- Should have given service for at least 10 years.
- They must have Retired normally or due to illness.
- They should not under Old Pension Scheme (OPS).
- This all condition applies only when your state or central govt has adopted UPS system.
Ex -If “Pallavi” is a government employee who has joined in 2005, worked for 20 years, and her state offers UPS- so she in that case is eligible.
NPS VS OPS [Old Pension Scheme vs National pension sysstem]
OPS – Old Pension Scheme
- You are getting a fixed pension monthly after you retire.
- You are not pay anything from your salary.
- The pension is about 50% of your last basic salary that you had.
- Only the government pays for this.
for example-If your last basic salary was ₹50,000,
you get ₹25,000 every month for the rest of your life after retirement.
There is no risk at all,but this only for people who joined before Jan 2004.
National Pension System
- In this the Government and you , both put money into a retirement account every month.
- This money is to be invested for stocks and bonds.
- And when you are retired,the money that was kept,is used to provide you a monthly pension, but its not fixed.
Nps is flexible and portable(if you change jobs from a state government job to a private company so you can carry your Nps account without needing a new one)
👎But this pension is not sure or guaranteed as it depends upon market returns.
Common FAQS for UPS,NPS,OPS
1. Who is eligible for the Unified Pension Scheme?
All the central government employees who joined on or after January 1, 2004.
2. Can I get shifted from NPS to UPS?
Yes, in some cases, you can shift from NPS to UPS, but it depends on you state policies and your employer with these condition.
You were elected on or after Jan 1, 2004.
You are still serving in government services.
Your state or employer has to officially allow the switch.
You should meet the minimum service criteria years which is usually 10 +
3. Does UPS allows Tax exemptions ?
Yes, the Unified Pension Scheme (UPS) generally allows tax exemptions under certain conditions.
Tax exemptions are available under Sections 80CCD, 80CCE, and 80CCD(1B).
For exact tax details, its always good to consult a tax advisor or refer to specific scheme regulations.
4. Which scheme is the best: UPS, NPS, or OPS?
•If an employee likes higher returns but uncertain returns, NPS can be taken into consideration.
•If an employee wants guaranteed pension and inflation protection, then he should choose UPS or OPS.
•UPS is better for most modern government employee who is more into looking for security and flexibility.
5. What are the online platforms for pension calculation?
You can use online calculators if you are having issues with the calculation:
Clear Tax UPS Calculator
Unified Pension Scheme Calculator
6. What are the formalities that an eligible central government employee has to go through to opt for UPS?
| Type of Person | Form that they need to Fill | When to Submit this |
|---|---|---|
| Existing employee (before Apr 1, 2025) | Form A2 | Within 3 months of April 1, 2025 |
| New recruited employee (joining after Apr 1, 2025) | Form A1 | Within 30 days of joining |
| Retired employee (before Apr 1, 2025) | Form B1 | Within 3 months of April 1, 2025 |
| Spouse of deceased NPS employee | Form B2 | Within 3 months of April 1, 2025 |
7. Where can the eligible employee get this form?
The forms basically A1and A2, along with the information of the list of documents to be attached with this , can be easily downloaded from the website of the Protean CRA at http://www.npscra.nsdl.co.in/ups.php
8. What are the list of docs that are to be attached ?
Aadhaar Card, Bank Passbook/Cancelled Cheque, Age Proof, Mobile Number, Passport-size Photo, Income Certificate (if needed), and Nominee Details.
9. What is the minimum assured payout under UPS?
If an employee retires(superannuation) after having completed atleast 10 years of service, then the employee is guaranteed a "minimum monthly pension of ₹10,000 "under the "UPS".
But this conditions should be met:
✔️ The employee should have regularly contributed to the pension fund (his 10% and government’s 18.5% must be credited in a proper way ).
❌ the employee should not have withdrawn from the fund during the job period.
10. Is UPS inflation-proof?
Yes it increases with Dearness Allowances just like the OPS
Your DA increases over time based on inflation rate i.e (cost of living).
If your DA rises, your monthly pension also increases.
11. What are the bench mark of the inflation protection?
The Unified Pension Scheme (UPS) does includes inflation indexation, which means pensions, family pensions, and minimum assured pensions are adjusted based upon All India Consumer Price Index for Industrial Workers (AICPI-IW). This helps to increase the retired persons purchasing power go with the rising prices.
11. Are there any official UPS Pension Scheme PDF or Notification?
Yes! infact there are and the government has published a Unified Pension Scheme Notification PDF, covering the topics of calculation of formula, eligibility, , and implementation of the scheme
You can find it on official platforms or reliable news sites like Indian Express.
12. What’s the contribution of all schemes in the structure?
| Scheme | Employee Pays | Government Pays |
|---|---|---|
| UPS | 10% | 18.5% |
| OPS | 0% | 100% |
| NPS | 10% | 14% |
13. What will happen if the employee does not opt for Ups in the given time ?
The employee might not be enrolled automatically.
They could miss out on key benefits such as government contributions, tax exemption.
In some cases, employee may remain in the previous pension schemes.
And the employee may find it difficult switching to UPS later as it may be restrivted or allowed only under special provisions.
14. What is Unified Pension Scheme for UPSC?
The Unified Pension Scheme (UPS) is very important UPSC aspirants because it's a recent government initiative that affects the financial security of central government employees, a key area covered by the Indian economy and polity sections of the syllabus.
Important for GS Paper II (Governance, Welfare Schemes).
Crucial for GS Paper III (Economic Development, Inclusive Growth).
Useful in Essay writing and Ethics (public service & social justice).
Image Credits:
Featured image Photo by Micheile Henderson on Unsplash .