The central government on Saturday made a big announcement to launch the Unified Pension Scheme. Earlier it was considered a middle path between NPS and OPS, but on Tuesday the Finance Minister clarified that it is different and better than NPS.
Now there is a question in the minds of the people how is it so. Let us understand through calculations that if one’s salary is ₹ 50,000 per month, how can one get more pension through UPS than NPS.
What is special about UPS
To understand the whole calculation, it is important to first know what is special in the Unified Pension Scheme launched by the government, which makes it different from NPS.
So let us tell you that a full pension will be available only when an employee completes 25 years of service.
The pension amount will be 50% of the average basic salary for the last 12 months. Apart from this, there is also a provision of a minimum assured pension in UPS, under which a pension of at least ₹ 10,000 per month will be guaranteed after working for 10 years.
In the family pension category in UPS, 60% of the pension will be given to the family of the employee on his death. Along with all these pensions, the benefit of dearness relief i.e. DR is also available.
This is the big difference between NPS-UPS
Talking about the big difference between the National Pension Scheme and Unified Pension Scheme, where in NPS the employee contributes 10 percent of his salary and the contribution given by the government is 14 percent, the total amount deposited in the NPS account is equal to 24 percent of the employee’s salary.
On the other hand, in UPS the employee contributes only 10 percent, but the government’s contribution is not 14 percent, but 18.5 percent. In total, 28.5 percent of the salary will be deposited in the UPS account.
Pension calculation
Now let’s talk about how an employee can get more pensions through UPS than NPS. So let’s understand it based on a calculation.
Based on a salary of ₹50,000, the employee’s monthly contribution to NPS will be ₹5,000 at the rate of 10 percent and 14 percent of this will be ₹7,000 to the government.
This will increase the deposit amount in the NPS account to ₹12,000. National Pension Scheme is a scheme linked to the stock market, in which on contributing, up to 60 percent of the amount is given as a lump sum at the time of retirement and the remaining 40 percent is given as an annuity.
Suppose it gives a return of 8 percent and the deposit amount increases by 3 percent annually and the annuity gives a return of 6 percent, then the total fund in NPS in 35 years will be ₹3,59,01,414.
Out of this, you will have to buy an annuity of about ₹1.43 crore. Accordingly, you will get a pension of ₹77,000 per month. Let us tell you that the return may increase or decrease due to being linked to the market.
Pension in UPS will be made in this way
At the same time, the entire fund of the account in UPS will remain with the government. In return, the employee will be given a lump sum of 10 percent of the salary on completion of every 6 months of service.
There will be 70 half years in a tenure of 35 years. If we assume the average salary to be ₹50,000, then ₹30,000 will be given for each half year.
In this way, a lump sum of ₹21 lakh will be received on completion of 60 years. However, this amount will also increase with the salary increase. Apart from this, the pension will be 50% of the average basic salary of the last 12 months.
If we calculate 35 years of service, the starting salary is ₹50,000, and suppose by the last 12 months of service your basic salary becomes ₹1,00,000, then your pension amount will be ₹50,000 per month and if we add 50% Dearness Relief (DR) to it as per the current rate, then the total pension becomes around ₹100000.
In such a case UPS will give more pensions than NPS. It is better for those who are retiring soon but they will not get returns through investment like NPS.