UPS vs NPS vs OPS Pension Calculations: Average basic pay at retirement Rs 1,00,000; 30 years of pensionable service? Which can give you highest monthly pension?

OPS is the oldest of all 3 pension systems. Started in the 19th century, it saw many phases, but it came into its present form post-Independence. The year 1998 saw a striking change when the retirement age of the employee in OPS was increased from 58 years to 60 years. The central government discontinued this scheme for employees who joined services from January 1, 2004. Employees who joined before that get their pension under OPS. It also has the facility of a family pension. The pensioner can also commute up to 40 per cent of their pension.

In OPS, the employee doesn't have to contribute to any retirement fund to get their monthly pension. But NPS changed this system. The government implemented NPS on January 1, 2004. In NPS, the employee and the employer contribute to the employee's NPS' Tier I account. The employee can withdraw their 60 per cent corpus at retirement.

NPS doesn't guarantee an assured pension. UPS changed it. The scheme implemented from April 1 offers an assured pension of Rs 10,000 on completion of 10 years of service. The maximum pension is 50 per cent of the average of the last 12-month basic pay and dearness allowance (DA) immediately prior to superannuation. It also has the provision of a family pension and a lump sum payout at retirement. 

There are two conditions: the average of the sum of 10-month average emoluments (basic pay + NPA) or the sum of last month's emoluments (basic pay + NPA); of the 2, whichever is a greater amount, 50 per cent of that will be the basic pension in OPS.  However, to receive a pension under OPS, the minimum pensionable service is 10 years.

If the pensioner dies, their family is allowed to get 60 per cent of the deceased's pension amount. 

The employee contributes a minimum of 10 per cent of basic pay and DA, and the employer contributes a maximum of 14 per cent. The amount is invested in equity and debt assets. At 60 years of age, the NPS account holder can withdraw a maximum of 60 per cent of the corpus. The remaining corpus is invested in an annuity plan, which provides the monthly pension. The account holder can also purchase annuity from their 100 per cent retirement corpus. The pension amount will increase according to that.

The employee contributes a minimum of 10 per cent and the employer a maximum of 18.5 per cent. The amount is invested in equity, debt assets, and pooled assets for assured income. The pension is a maximum of 50 per cent of the 12-month average basic pay and DA immediately prior to superannuation. Pension can increase from the assured amount if the performance of the invested amount is good.

In UPS, if a pensioner dies after superannuation, their family will get the family pension that will be 60 per cent of the payout admissible to the payout holder immediately before their demise. The lump sum amount an employee will receive at their retirement will be 10 per cent of monthly emoluments (basic pay+DA) for every completed six months of qualifying service.

We will calculate which system may provide the highest pension to a central government employee whose average 12-month salary immediately prior to superannuation is Rs 1,00,000, and whose pensionable service is 30 years. We will calculate the pension at a 55 per cent DA rate.

The estimated OPS pension they can get will be Rs 77,500.

The estimated family pension in such a case will be Rs 46,500.

The estimated minimum assured OPS pension in these conditions will be Rs 77,500.

The estimated minimum assured OPS pension in these conditions will be Rs 77,500.

The estimated lump sum amount in this case will be Rs 9,30,000.

Since here, the pension depends on contribution and not average basic pay, the calculation will be based on NPS account contributions.  We create here a situation where we assume that the person started their NPS contribution with a monthly amount of Rs 6,600 (including the government's portion), where they increase their yearly amount by 5 per cent.  The total investment in 30 years will be Rs 52,61,757. The estimated gains in 3 decades will be Rs 1,37,96,790, while the estimated corpus will be Rs 1,90,58,747. The estimated lump sum withdrawal will be Rs 1,14,35,248, while the annuity estimated value will be Rs 76,23,499.  The estimated monthly pension will be Rs 42,822. But if they drop the plan to withdraw a lump sum and purchase annuity from the 100 per cent corpus, their estimated monthly pension will be Rs 1,07,205. In this calculation, the return from NPS investment is 9.18 per cent and the return from annuity is 6.75 per cent.