UPS vs NPS: Which pension scheme will be better for you, what is the difference between the two?

The central government has approved the Unified Pension Scheme (UPS). This will guarantee a pension after retirement. Government employees were demanding for a long time to withdraw the National Payment System (NPS) and restore the old pension scheme. The government has created a unified pension scheme by mixing the old pension scheme and NPS.

Let us know what is the unified pension scheme and what is the difference between it and NPS.

What is the Unified Pension Scheme?
The Unified Pension Scheme (UPS) is a new initiative of the government led by PM Narendra Modi. It is largely the old pension scheme. In this, government employees will get a guaranteed fixed and minimum pension. If any retired employee has given a minimum service of 25 years, then he will get 50 percent of the average basic salary of the 12 months before retirement as a pension.

This means that if the average basic salary is Rs 50 thousand, then he will get Rs 25 thousand per month as a pension. If the service period is less, then he will get less pension accordingly. It will be mandatory to serve at least 10 years for pension.

What is the National Pension System?
The National Pension System (NPS) was introduced by the Atal Bihari Vajpayee government in 2004. It was also opened to private sector employees in 2009. Its purpose was to replace the Old Pension Scheme (OPS), which was putting a heavy burden on the government treasury. Government employees protested from the beginning, which continued till now.

Under NPS, contributions for pensions were also taken from employees. Also, after retirement, employees could withdraw 60 percent of the amount, while the remaining 40 percent would give them a pension. There are also some restrictions regarding time in this.

Difference between UPS and NPS
Under UPS, central employees will get a fixed pension. It will be half of their average basic salary of 12 months before retirement. At the same time, the pension amount in NPS depended on the market returns, due to which it fluctuated.

In both UPS and NPS, government employees will have to contribute 10 percent of their salary. However, the government will increase its contribution. It used to contribute 14 percent in NPS, while in UPS it will contribute 18.5 percent.

Under UPS, employees will get a fixed pension and lump sum amount after 25 years of service. Pensions will also increase according to the inflation rate. At the same time, many employees were getting nominal pensions in NPS.

There was no fixed pension in NPS. At the same time, UPS guarantees pension, family pension, and minimum pension. After 10 years of service, UPS will guarantee a minimum pension of 10 thousand. There is no such provision in NPS.

NPS contributions are invested in the market. In such a situation, pensions were also dependent on market fluctuations. UPS has eliminated dependence on the market, which gives more stability to the employees.

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