NPS vs OPS vs UPS: On Rs 15,000 monthly contribution for 30 years, which of 3 can give highest pension? Get calculations

The pension scheme in India was introduced by the Royal Commission on Civil Establishment, 1881. It was a predecessor to OPS, which was introduced in 1924. The condition for a government employee to get a monthly pension at 58 years of age was the service for at least 10 years. 

Post-independence, some changes were made where employees would invest 10 per cent of their monthly salary along with a basic and dearness allowance, while the government would contribute 14 per cent. In 1998, the pensionable age was increased to 60 years. OPS continues in some states till date. 

The pension under the old pension scheme is 50 per cent of the last drawn basic pay. Along with that, pensioners also get a non-practicing allowance, stagnation increment, and death gratuity.

The government introduced the National Pension System in 2004. To get a pension under NPS, government employees must be in service for at least 10 years. The basic difference in this system was that NPS account holders could invest in market-linked instruments. 

At the same time, they would also invest in fixed income sources. Started for government employees, the scheme was opened for private sector employees, self-employed, and other individuals in 2009. 

Government employees can contribute up to 10 per cent of their basic pay to their NPS account. The employer contribution is 14 per cent of their basic pay. They can expect an 8 to 10 per cent return on their contribution. The pension amount depends on the annuity amount. An NPS subscriber can withdraw up to 60 per cent of their retirement corpus at 60 years of age and needs to purchase annuity from the rest of the amount. 

If they want, they can purchase annuity from their entire 100 per cent corpus. The expected return from this investment is 6 per cent to 7 per cent that the NPS account holder gets in the form of a monthly pension. 

The government proposed this pension system last month. The government said that UPS consolidated multiple pension systems like OPS and NPS into a single framework.

The basic difference between UPS and NPS is that in NPS, the employer's contribution is a maximum of 14 per cent of the basic pay and DA, while in UPS, the employer's contribution will be 18.50 per cent of the same.

In UPS, the pension amount is 50 per cent of the last 12 months basic pay (for employees who have completed 25 years of service). 

Here, we are taking the example of a 30-year-old employee who will contribute Rs 15,000 a month for 30 years. Get to know their expected monthly pension under NPS, UPS, and OPS.

SCHEME Contribution Duration  Total Contribution ASSUMPTIONS PENSION Old Pension Scheme 30 years Rs 54,00,000  Pension= 50% of Last Drawn Basic Pay, assumed last basic pay as Rs 2 lakh ₹1,00,000 per month New Pension Scheme 30 years Rs 54,00,000  ·       Employee Contribution: 10% of basic pay, Employer Contribution: (assuming a government employee scenario) : 14% of the basic pay, Return on investment 10% per annum Rs 68,380- Rs79,776 per month (varies by annuity return) Approximate corpus at retirement = Rs 3.41 Cr Monthly Pension: Annuity purchased from 40% of corpus, estimated corpus : 3.41  cr Unified Pension Scheme 30 years     Rs 54,00,000  ·                Hybrid Formula: A percentage of the OPS pension combined with an NPS-like contribution benefit. (18.5% of the basic +DA contributed by government, 10% by employee) 50% of the last 12 months basic ( for employee who have completed 25 years of service)   Rs 10,000 for employees who have competed minimum 10 years of service