UPS vs NPS : The Government announced a new employee pension scheme, Unified Pension Scheme (UPS), on August 24, 2024. This came into effect from April
1, 2025. All government employees are currently covered under the National Pension Scheme (NPS), which provides a pension based on market-linked investments. However, before 2004, all government employees received pensions under the Old Pension Scheme (OPS).
In 2004, the government introduced the NPS and discontinued the OPS. The government employees were not happy with the decision so far. Therefore, the government announced the UPS to provide assured pension amounts. However, only employees who are currently subscribers of the NPS, including retirees, can opt for the UPS. Now, let’s break down the key differences between NPS and UPS.
What is Unified Pension Scheme (UPS)?
The Unified Pension Scheme (UPS) is an option introduced by the central government under the National Pension System (NPS) for the Central Government employees covered under NPS, so that they may receive an assured payout after their retirement. It is a ‘fund-based’ payout system which relies on the regular and timely accumulation and investment of applicable contributions (from both the employee and the employer (the Central Government)) for the grant of a monthly payout to the retiree.
What is NPS (National Pension Scheme)?
NPS is a market-linked defined contribution scheme that helps you save for your retirement. It allows you to plan for a financially secure retirement with systematic savings in a planned way. NPS was introduced by the Central Government to help individuals have an income in the form of a pension to take care of their retirement needs.
UPS vs NPS: Key differences
1. Who is eligible to open UPS or NPS account:
UPS - The Central Government employees, who are covered under NPS and who choose the option for UPS, are eligible to receive an assured payout under UPS.
NPS - Government employees, individuals between 18-60 years and NRIs.
2. Pension amount:
UPS - 50 per cent of the 12-month average basic pay, immediately before superannuation. Full assured payout is payable after a minimum of 25 years of qualifying service. In case of a lesser qualifying service period, a proportionate payout would be admissible.
NPS - Pension amount depends on the investments made in the NPS investment scheme and the accumulated corpus.
3. Minimum pension amount:
UPS - A minimum guaranteed payout of Rs 10,000 per month shall be assured in case superannuation is after 10 years or more of qualifying service, subject to timely and regular credit of contributions and no withdrawals.
NPS - The minimum pension amount depends on the investments made in the NPS scheme.
4. Family pension:
UPS - In case of the death of the payout holder after superannuation, 60 per cent of the payout is admissible to the payout holder immediately before his demise, and shall be assured to the legally wedded spouse.
NPS - Family pension amount depends on the accumulated corpus and the chosen annuity plan.
5. Risk factor
UPS - It is a government-backed scheme, thus it is risk-free and provides an assured pension amount.
NPS - on the other hand, NPS is a market-linked contribution scheme introduced by the central government. It involves market risks as the returns depend on the performance of the market-linked funds.
