The Union Cupboard of India, led by Prime Minister Narendra Modi, authorized the Unified Pension Scheme (UPS) on August 24, 2024. This landmark choice introduces a brand new pension system aimed 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:
Workers 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 should 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 dying, their household will obtain 60% of the pension quantity that was being disbursed on the time of his dying.
3. Minimal Assured Pension:
The scheme ensures a minimal pension of ₹10,000 per 30 days for retirees who’ve accomplished at the least 10 years of service.
4. Inflation Indexation (Dearness Reduction):
Pension quantities, together with household pensions, shall be adjusted for inflation, making certain that the worth of the pension retains tempo with rising dwelling prices.
5. Lumpsum Fee:
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 scale back the assured pension.
Implementation
The UPS is ready to be carried out on April 1, 2025 and is predicted to profit round 23 lakh central authorities workers. Workers presently underneath the NPS could have the choice to change to the UPS, and this alternative shall be remaining. The scheme can also be open to adoption by state governments, which might probably lengthen its advantages to thousands and thousands 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 hard and fast 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 is no such thing as a 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 completely funded by the federal government and was obtainable 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 larger degree of assist 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 offers no direct inflation safety; pension depends upon the efficiency of the funding portfolio.
- UPS takes into consideration the impression of inflation.
4. Selection and suppleness:
- No alternative was supplied; all eligible workers have been routinely enrolled in OPS.
- Workers have the flexibleness to decide on their pension fund managers and funding choices inside NPS, however they’re topic to market dangers.
- Workers have the one-time option to decide 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; nevertheless, the remaining corpus will be transferred to the nominee upon the dying of the subscriber.
- UPS: In case of the pensioner’s dying, the household receives 60% of the pension.
The desk under offers an in depth comparability between the three schemes.
| Function | 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 per 30 days |
| Lump-Sum Fee | 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 as a result of assured advantages and inflation changes. The Nationwide Pension System (NPS) addressed these issues 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 might probably provide the very best of each worlds, making certain monetary safety for workers whereas additionally addressing the federal government’s long-term fiscal challenges.