What is UPS pension scheme retirement: A sister of OPS

There is yet no clarity on how the new ups unified pension scheme is going to be adopted, and what happens to the current National Pension System.

The Union government declared a new ups scheme for govt employees which will substitute the National Pension System. We are expecting that other state governments will also follow suit.

The NPS bids a market-linked pension – the contributions are invested, and the collected corpus at the age of retirement is used to purchase an annuity. This may outcome in a pension that is lower than 50 per cent of the last drawn salary.

The Unified Pension Scheme proposes three core benefits. First, it proposes employees – with 25 years or more of service – a pension equal to 50 per cent of their last drawn pay (the average of past 12 months salary). Second, if the employee expires before retirement, his family will get a pension equivalent to 60 per cent of the employee’s basic pay. Third, if the employee leaves government service after a minimum period of 10 years, the pension will be proportionate to a minimum of Rs 10,000 per month.

Fourth, all the expenses will be indexed to inflation. That is, as inflation increases, the value of the pension salary will also increase. The rise will be based on the All India Consumer Price Index for Industrial Workers (AICPI-IW). Fifth, the gratuity and a lump sum money at retirement will be provided.

The government has given its employees the choice to switch to UPS. However, there is no clear on how the new pension scheme is going to be operationalised, and what is going to happen to the existing NPS architecture.