NPS vs UPS vs OPS: What will be your monthly pension if you contribute Rs 10,000 monthly for 35 years? Get expert calculations

The pension under the OPS is 50 per cent of the last drawn basic pay.

The central government launched NPS for central government employees in 2004. The government included private employees, self-employed, and other individuals in 2009. The scheme is market-linked, where NPS subscribers can choose market exposure up to 75 per cent. They can make lump sum or monthly contribution to their NPS corpus from 18 years of age till 75. At 60 years of age, they can withdraw up to 60 per cent of their retirement corpus, and from the rest of the 40 per cent amount, they need to purchase annuity for monthly pension.

In case of a government employee, the employee can contribute up to 10 per cent of their basic pay. The employer contribution is 14 per cent of the their basic pay. The expected return on investment can be 8 to 10 per cent. There is no fixed pension in NPS, it depends on the NPS subscriber's contribution and its duration.

The government proposed this pension system last month. UPS is aimed at consolidating multiple pension systems like OPS and NPS into a single framework. It is more towards NPS, but the major difference is that unlike in NPS, where the employer's contribution is a maximum of 14 per cent of the basic pay and DA, in UPS, the employer's contribution will be 18.50 per cent of the employee's basic pay and DA.

In UPS, pension will be the 50 per cent of the last 12 months basic pay ( for employee who have completed 25 years of service). A potential hybrid model in UPS, combining elements of OPS and NPS might offer a monthly pension of approximately equal to 50 per cent of the average basic of last 12 months factoring in both a partial defined benefit and a contribution-based annuity, as per Krishan Mishra, CEO, FPSB India.

Here, we are taking the example of a 25-year-old employee who will contribute Rs 10,000 a month for 35 years. Through expert calculations, we will show you how the employee will get their pension in NPS, UPS, and OPS.

SCHEME DETAILS Contribution Duration  Total Contribution ASSUMPTIONS PENSION Old Pension Scheme The OPS is a defined benefit pension plan, which typically calculates the pension based on the last drawn salary and the years of service. 35 years ₹42,00,000  Pension= 50% of Last Drawn Basic Pay ₹1,00,000 per month assumed last salary ₹2,00,000 New Pension Scheme NPS is a defined contribution scheme, where both the employee and employer contribute a percentage of the employee’s basic salary. The pension depends on the accumulated corpus and how much of it is used to purchase an annuity. 35 years ₹42,00,000  ·       Employee Contribution: 10% of basic pay ₹40,000 - ₹45,000 per month (varies by annuity) Employer Contribution: (assuming a government employee scenario) : 14% of the basic pay  Return on Investment: 8% per annum   Corpus= (P*(1+r)^t-(1+g)^t/(r-g)) P- initial Contribution, r-8%,t=35, g=5%( Salary growth) Approximate corpus at retirement = Rs 1.45 Cr Monthly Pension: Annuity purchased from 40% of corpus, estimated corpus : 1.45  cr Unified Pension Scheme The Unified Pension Scheme (UPS) is an idea aimed at consolidating multiple pension systems, like the Old Pension Scheme (OPS) and the National Pension System (NPS), into a single framework, with an aims to harmonize the best aspects of OPS and NPS into a single scheme. 35 years     ₹42,00,000  ·                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)   ·                Pension: 50% of the Average basic of last twelve months for employees who have completed 25 years of service 50% of the last 12 months basic ( for employee who have completed 25 years of service)     As per the above, a potential hybrid model combining elements of OPS and NPS might offer a monthly pension of approximately equal to 50% of the average basic of last 12 months factoring in both a partial defined benefit and a contribution-based annuity. Rs 10000 for employees who have competed minimum 10 years of service

Chart Courtesy: Krishan Mishra, CEO, FPSB India