UPS vs NPS vs OPS: Last-drawn basic salary Rs 80,000; pensionable service 25 years; what can be your monthly pension in each scheme

The pension scheme started in the 19th century changed many faces during its existence of more than a century. It came into its present form post-independence. One striking change was to increase the retirement age from 58 to 60 in the year 1998. The central government scrapped OPS and launched NPS in 2004.

Many states switched to NPS, but some stuck to OPS such as West Bengal and Tripura. The OPS has been readopted by state governments such as Himachal Pradesh, Chhattisgarh, Rajasthan, and Punjab.

When Centre scrapped OPS and launched NPS in 2004, it was a sea change, since in NPS, the pension was not fixed. Rather, it was based on a government employee's contribution to their NPS account corpus. The more they contribute, the higher pension and lump sum amount they can generate. The scheme was opened to all in the year 2009. The Tier I account of NPS provides tax benefits, plus assures account holders/employees of lump sum amount and monthly pension.

The central government announced this new scheme in August 2024 and notified it last month. The scheme will be implemented from April 1, 2025. UPS promises to have the combination of OPS and NPS. The unique feature is that the employer's contribution is their 10 per cent of basic pay, and the employer's contribution is 18.5 per cent of the employee's basic pay and DA. In NPS, the employer contribution is 14 per cent. 

The calculation is based on their basic salary and years of service. A minimum of 10 years of service is required to be eligible for an OPS pension. Unlike in NPS and UPS, employees don't need to contribute to create their pension corpus.

For central government employees, the employee contribution is 10 per cent, while the employer contribution is 14 per cent. Employees can increase their NPS contribution. Their contribution is invested in equity and debt funds. The pension is based on the contribution and return from their investments. At 60 years of age, they can withdraw up to 60 per cent of their corpus, and from the remaining 40 per cent amount, they can purchase an annuity plan. The return from the annuity plan will be their monthly pension. They can also purchase an annuity from their 100 per cent NPS corpus.

The scheme also has an assured pension of at least Rs 10,000 after a minimum of 10 years of service. 

Apart from that, pensioners with at least 25 years of service will get a pension of 50 per cent of the average basic salary over the last 12 months.

At retirement, employees also get a lump sum amount, which is equal to 1/10th of their monthly emoluments (basic pay+DA) as on the superannuation date for every six months of completed service.

If the pensioner has died, their family can get a pension equal to 60 per cent of the deceased's pension.

In such a case, the monthly pension will be Rs 40,000.

The normal family pension will be Rs 24,000.

The enhanced family pension will be Rs 40,000.

In that case, they will get a lump sum amount of Rs 1573249, and their monthly pension will be Rs 24,000.

At 53% dearness allowance (DA)

The pension in this case will be Rs 40,000.

The lump sum amount that they will get at the retirement time will be Rs 6,12000.

The family pension will be Rs 24,000, while the lump sum amount will remain the same. 

Since NPS is voluntary, we are assuming an Rs 8,000 monthly contribution for 25 years in 50 per cent investment in equity and 50 per cent in debt.

At that contribution, the estimated lump sum amount in 25 years will be Rs 52,39,853, and the monthly pension will be Rs 19,649.

However, in real life, the pension can be much more since one is most likely to increase their contribution as their salary increases.