Pension : Financial security is paramount after retirement, necessitating a well-structured investment strategy. If your goal is to receive a monthly pension of Rs 1 lakh post-retirement, it is essential to invest in an appropriate scheme. The National Pension System (NPS) and the Universal Pension Scheme (UPS) are the two primary avenues available to help you reach this objective. It is important to analyze the required investment amounts for each scheme and determine which option may be more advantageous.
What is NPS and what is UPS
The NPS is a government-sponsored retirement plan in India that requires individuals to make regular contributions. Participants receive both a lump sum payment and a pension upon reaching the age of 60. The returns from this scheme are influenced by market conditions. Conversely, the UPS is a private pension option that allows individuals to select an investment plan tailored to their specific needs. This scheme encompasses various company offerings, and the returns can differ significantly. Under the UPS, the government contributes 18.5% of the combined basic salary and dearness allowance (DA), while the employee contributes 10%, mirroring the NPS structure.
While the NPS does not guarantee a fixed pension, the UPS offers a pension based on a percentage of the average basic salary. The NPS allows for investments in equity, debt, and other market-linked funds, whereas the UPS primarily invests in government bonds and secure schemes. Notably, the government’s contribution to the UPS exceeds that of the NPS.
How to get Rs 1 lakh monthly pension
For instance, if an individual begins a government job on April 1, 2025, at the age of 25 and retires at 60, they will have worked for 35 years. Assuming the average basic salary during the last year before retirement is Rs 2 lakh per month, the UPS would provide a guaranteed pension of 50%, equating to Rs 1 lakh monthly. Additionally, the UPS includes provisions for annual pension increases in line with inflation. If we project an annual increase of 4.5%, the pension at age 61 would rise to Rs 1,04,500.