UPS vs NPS vs OPS: For a long time, government employees have been demanding either amendment to the New Pension Scheme (NPS) or the reinstatement of the Old Pension Scheme (OPS). The opposition was also using this issue to garner support. In response, the Modi government has now taken decisive action. On Saturday, the Union Cabinet, led by Prime Minister Modi, approved a new pension scheme called the Unified Pension Scheme (UPS). Under this scheme, 50 per cent of the average basic pay is drawn over the last 12 months prior to superannuation for a minimum qualifying service of 25 years. Additionally, the scheme offers various other benefits, such as assured pension, assured family pension, assured minimum pension, inflation-linked indexation, and extra payment in addition to gratuity. Let’s explore the differences between the Unified Pension Scheme (UPS), the New Pension Scheme (NPS), and the Old Pension Scheme (OPS).
Old Pension Scheme (OPS)
- Under OPS, 50 per cent of the employee's salary at the time of retirement is provided as a pension.
- OPS includes a provision for the General Provident Fund (GPF), where employees can contribute a portion of their salary, which is then returned with interest at the time of retirement.
- In OPS, employees are eligible to receive a gratuity amount of up to Rs 20 lakh.
- Payments under OPS are made through the government treasury, ensuring that pensions are funded directly by the government.
- In the event of the death of a retired employee, their family continues to receive the pension amount.
- There is no deduction from the employee's salary for the pension under OPS.
- OPS includes a provision for receiving Dearness Allowance (DA) every six months, which helps adjust the pension according to inflation.
New Pension Scheme (NPS)
- Under NPS, 10 per cent of the employee's basic salary plus Dearness Allowance (DA) is deducted for the pension fund.
- NPS is linked to the stock market, which means the returns are subject to market fluctuations and it is not entirely risk-free. It also includes tax provisions.
- To receive a pension upon retirement, 40 per cent of the NPS fund must be invested in annuities.
- NPS does not offer a guaranteed fixed pension amount after retirement; the pension depends on the fund's performance.
- Unlike OPS, NPS does not provide Dearness Allowance (DA) adjustments after retirement.
Unified Pension Scheme (UPS)
- In UPS, the responsibility for funding the pension does not fall on the employee, and there is a provision for an assured pension.
- Employees will receive 50 per cent of their average basic pay from the 12 months before retirement as their pension.
- If an employee dies before retirement, 60 pe rcent of the pension due will be provided to the spouse.
- For those with a shorter service period, UPS guarantees a minimum pension of Rs 10,000 per month.
- UPS includes inflation indexation, similar to dearness allowance, to adjust assured pension, family pension, and minimum pension according to inflation rates.
- In addition to gratuity, UPS provides a lump sum payment at retirement. For every six months of service, employees receive 1/10th of their monthly salary (pay + DA) as a one-time payment.
Also Read: 'Unified Pension Scheme' approved by Centre | Here are key features of UPS
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