Unified Pension Scheme | UPS vs NPS vs OPS

• Context (TH): The NDA government has introduced the Unified Pension Scheme (UPS), which closely resembles the Old Pension Scheme (OPS) and assures government employees a lifelong monthly benefit of 50% of their last drawn salary.
• The Unified Pension Scheme was based on T.V. Somanathan Committee recommendations for reviewing the National Pension System (NPS) to balance employee aspirations with fiscal responsibility.
• The scheme offers a choice for employees who joined after 2004 between the new scheme and the existing National Pension System (NPS).
• It will take effect from April 1, 2025. The State governments can adopt it as per their preference.

Key Features of Unified Pension Scheme (UPS)

1. Guaranteed Pension: Of 50% of their last drawn salary as a lifelong monthly pension.
2. Inflation indexation: Dearness relief calculated based on All India Consumer Price Index for Industrial Workers will be available on these three kinds of pensions, as in the case of serving employees.
3. Family Pension: In case of an employee’s death, the family will receive 60% of the pension amount.
4. Lumpsum Superannuation Payout: Additional payout at retirement, alongside gratuity benefits.
5. Minimum Pension: ₹10,000 per month for those with at least 10 years of central government service.
6. Contribution: The UPS scheme is contributory, similar to the NPS, and is funded by contributions from both employees (10% of their salary) and the government (18.5% of the salary). The government’s contribution may be adjusted on periodic actuarial assessments to ensure the scheme’s sustainability.

Old Pension Scheme (OPS)

• OPS pension to government employees at the Centre and States was fixed at 50% of their last drawn basic pay. In addition, a Dearness Relief was given to adjust to the increase in cost of living which was calculated as a percentage of the basic salary.
• However, it was unfunded as no corpus was specifically available for pension which led to the introduction of New Pension Scheme in 2004 by the NDA government.

New Pension Scheme (NPS)

• NPS replaced the OPS on January 1, 2004 as a part of Centre’s effort to reform pension policies in India as OPS could not run in long term as it imbalances fiscal expenditure.
• NPS contribution: 10% of the basic salary and dearness allowance by the employees and 14% by government (which is proposed to be increased to 18% under UPS).
• Schemes under NPS is offered by nine pension fund managers: LIC, SBI, ICICI, Tata, Aditya Birla, Kotak Mahindra, HDFC, UTI and Max.

Difference between OPS, NPS and UPS

• OPS pension to government employees at the Centre and States was fixed at 50% of their last drawn basic pay in addition to a Dearness Relief calculated as a percentage of the basic salary to adjust to the increase in cost of living but it was unfunded as no corpus was specifically available for pension..

Read more >Difference between OPS and NPS.