The Unified Pension Scheme (UPS) offers government employees a valuable retirement benefit. While the scheme provides a minimum pension of ₹10,000 for those who serve at least 25 years, it’s important to understand how the pension is calculated for those who retire earlier.
Pension Calculation for Less Than 25 Years
Employees who retire before completing 25 years of service will receive a pension based on their actual service period and average salary.
The calculation is proportionate, ensuring that you receive a pension commensurate with your contribution to the scheme.
Key Features of UPS
Contribution- Employees contribute 10% of their basic salary, while the government contributes 18.5%.
Minimum Pension- Employees who serve for at least 10 years are eligible for a minimum pension of ₹10,000 per month.
Full Pension Eligibility- To receive the full pension, employees must complete a minimum of 25 years of service.
Pension Calculation for Less Than 25 Years- Employees retiring before completing 25 years will receive a proportionate pension based on their service period.
Family Pension- In case of an employee’s death, their family members are eligible for a family pension of 60% of the pension they were receiving.
Dearness Relief- Pensioners may receive dearness relief to adjust for inflation.
Lump Sum Payment- In addition to the monthly pension, employees may receive a lump sum payment upon retirement.
How Pension is Calculated for Less Than 25 Years of Service
The pension amount for employees retiring before completing 25 years of service will be calculated based on their average basic salary in the last 12 months and their actual service period. The formula for calculating the pension is:
Pension = (Average Monthly Basic Salary) x (Actual Service/25)
Example
If an employee retires after 15 years of service and their average monthly basic salary in the last 12 months was ₹50,000, their pension would be calculated as follows:
Pension = (50,000) x (15/25) = ₹30,000 per month
The Unified Pension Scheme offers a secure retirement plan for government employees.
Even if you retire before completing 25 years of service, you can still receive a pension based on your tenure.
Understanding the pension calculation process and the scheme’s features will help you make informed decisions about your retirement planning.