UPS: The perfect fusion of NPS and OPS? Here's what government says

The government says the new Unified Pension Scheme (UPS) combines the best aspects of both the Old Pension Scheme (OPS) and the National Pension System (NPS). It brings together OPS features like assured pensions, inflation-linked adjustments, family pensions, and a guaranteed minimum pension. Meanwhile, it retains the NPS's provision for employee contributions towards their pension fund.

Let's have a look at some similar features of UPS, NPS and OPS;

OPS features of UPS

The Unified Pension Scheme (UPS) offers a fixed pension amount, guaranteeing retirees a regular, predetermined sum after retirement.


Under UPS, central government employees with 25 years or more of service will receive 50% of their last drawn salary from the past 12 months as their pension. This pension amount will also be adjusted for inflation after retirement. For employees with at least 10 years of service, the pension will be proportional to their length of service, with a minimum pension of ₹10,000 per month.

The scheme includes an assured family pension equal to 60% of the employee's basic pay, payable if the employee passes away before retirement. Inflation-linked adjustments will apply to the assured pension, family pension, and minimum pension.

Additionally, UPS provides for gratuity or a lump-sum payment upon superannuation. The gratuity is calculated based on one-tenth of the monthly emoluments (pay plus dearness allowance) at the time of retirement, computed for every six months of service.

NPS feature of UPS

Government under UPS has also increased its contribution from 14 per cent currently in NPS to 18.5 per cent under UPS, employee contribution will remain the same at 10%.

Cabinet secretary-designate T V Somanathan said that there will be an actuarial calculation every three years to ensure that the liability does not remain unfunded, as was the case with OPS where governmentt had to bear the entire liability without the employee contributing anything.

The NPS which was introduced in in January 2004, was initially established as a retirement plan exclusively for government employees, but in 2009, it was expanded to cover all sectors. NPS is governed jointly by the government and the Pension Fund Regulatory Authority (PFRDA).

NPS offers a pension combined with investment growth. Upon retirement, employees can withdraw up to 60% of their accumulated savings tax-free, with the remaining 40% used to purchase an annuity product that provides a monthly pension.

In contrast, the OPS guarantees central and state government employees a pension of 50% of their last drawn basic pay, similar to the new UPS. OPS also includes dearness allowance (DA) to account for living cost increases, as does the UPS.

Additionally, under OPS, employees are eligible for a gratuity payment of up to Rs 20 lakh at retirement. If a retired employee passes away, their family continues to receive pension benefits. Unlike NPS, OPS does not require salary deductions for pension contributions.

With inputs from ANI