The Union Cupboard of India, led by Prime Minister Narendra Modi, authorised the Unified Pension Scheme (UPS) on August 24, 2024. This landmark resolution introduces a brand new pension system geared 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 The UPS stands as an alternative choice to the prevailing Nationwide Pension System (NPS) and the older, discontinued Outdated Pension Scheme (OPS). This text delves into the small print 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 beneath the UPS will obtain a pension equal to 50% of their common primary wage over the past 12 months earlier than retirement. To be eligible, workers will need to 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 loss of life, their household will obtain 60% of the pension quantity that was being disbursed on the time of his loss of life.
3. Minimal Assured Pension:
The scheme ensures a minimal pension of ₹10,000 monthly for retirees who’ve accomplished a minimum of 10 years of service.
4. Inflation Indexation (Dearness Reduction):
Pension quantities, together with household pensions, will probably be adjusted for inflation, making certain that the worth of the pension retains tempo with rising residing prices.
5. Lumpsum Cost:
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 (primary 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 anticipated to learn round 23 lakh central authorities workers. Workers at present beneath the NPS could have the choice to modify to the UPS, and this alternative will probably be ultimate. The scheme can be open to adoption by state governments, which might doubtlessly prolong 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 primary wage.
- The pension quantity in NPS is market-linked and varies primarily based on funding efficiency. There isn’t any assured pension beneath 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 supplies a daily pension.
- UPS brings again the idea of a assured pension.
2. Authorities contribution:
- OPS was totally funded by the federal government and was accessible to workers who joined service earlier than 2004. No wage deductions had 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 beneath 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 beneath NPS.
3. Inflation safety:
- In OPS, pensions had been adjusted periodically primarily based on inflation.
- NPS offers no direct inflation safety; pension is determined by the efficiency of the funding portfolio.
- UPS takes into consideration the impression of inflation.
4. Selection and adaptability:
- No alternative was provided; all eligible workers had been mechanically 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:
- Underneath OPS, a household pension was offered to the partner or eligible members of the family of the pensioner.
- NPS doesn’t have a devoted household pension plan; nevertheless, the remaining corpus will be transferred to the nominee upon the loss of life of the subscriber.
- UPS: In case of the pensioner’s loss of life, the household receives 60% of the pension.
The desk beneath offers an in depth comparability between the three schemes.
| Characteristic | Outdated Pension Scheme (OPS) | Nationwide Pension System (NPS) | Unified Pension Scheme (UPS) |
| Pension Kind | 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 Threat | 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 monthly |
| Lump-Sum Cost | Gratuity | Partial Withdrawal | Lump-Sum + Pension |
Conclusion
The Outdated 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 because of the assured advantages and inflation changes. The Nationwide Pension System (NPS) addressed these issues by shifting the danger to the worker and linking pensions to market efficiency. However NPS was criticized by a number of authorities workers for the shortage of assuredness within the pension payout. Therefore, UPS might doubtlessly provide the perfect of each worlds, making certain monetary safety for workers whereas additionally addressing the federal government’s long-term fiscal challenges.