New Pension Scheme: The central government has announced the implementation of the Unified Pension Scheme (UPS) for its employees, set to commence on April 1, 2025. This scheme guarantees a pension upon retirement that remains unaffected by fluctuations in the stock or debt markets.
Details about Unified Pension Scheme
Employees opting for the UPS will forfeit the ability to revert to the National Pension System (NPS). Consequently, it is imperative for employees to carefully consider their decision before selecting this scheme.
Difference between NPS and UPS
The NPS is a market-linked pension plan where the pension amount is contingent upon the performance of the stock and debt markets. In contrast, the UPS ensures a minimum monthly pension of Rs 10,000.
How much pension an employee can get
Various scenarios may arise for a employee. For instance, if an employee has completed 25 years of service and their average basic salary at retirement is Rs 12,00,000, the calculation for their pension would proceed as follows: dividing the total by 12 yields an average monthly basic salary of Rs 1,00,000. Multiplying this figure by 50 percent results in a monthly pension of Rs 50,000.
A simple calculation
Service Duration: 25 years or more
Average Basic Salary: Rs 12,00,000
Average Monthly Basic Salary: Rs 12,00,000 ÷ 12 = Rs 1,00,000
50% Pension Payout: Rs 1,00,000 × 50% = Rs 50,000 per month
A secure option for employees
The Unified Pension Scheme (UPS) presents a secure option for employees, offering a consistent monthly pension. With its launch on April 1, 2025, employees will have the choice to exit the NPS, but they will not be permitted to return to it.