UPS vs NPS vs OPS: Average basic salary at retirement Rs 95,000 after 27 years of service? Know which scheme may provide highest pension

OPS was introduced in the 19th century by Britishers, but it has gone through many changes ever since. It came into its current form post-Independence. OPS made an important change in 1998 when it extended the retirement age from 58 to 60.

In OPS, the average of the basic salary and emoluments of the last 10 months prior to retirement is taken into account. A pensioner gets 50 per cent of that average in the form of a monthly pension. OPS also has the provision of a family pension on the death of the pensioner. The family pension is 60 per cent of the full pension. However, an employee needs at least 10 years of service to be eligible to get a pension under OPS. If the service is less than that, they will get a lump sum amount at retirement, but they don't get the monthly pension.

OPS has a unique system of commuting the pension amount, where a pensioner can commute up to 40 per cent of their pension. In lieu of that, they get a lump sum amount at retirement. But they get a reduced pension, which is 60 per cent of the pension without commutation. However, the reduced pension is for 5 years. After that, they get a full pension.

Unlike OPS, where an employee doesn't need to make any contribution to get a pension post retirement, an NPS pension is based on the contribution of the employee and the employer. 

NPS replaced OPS on January 2024. Many states also opted for it, while a few stuck to OPS. The scheme, earlier restricted to government employees, was opened to all individuals, including NRIs, in 2009.

For an employee, the maximum NPS contribution can be 10 per cent of their basic pay and DA, while the employer can also contribute up to 14 per cent. The NPS account holder can withdraw up to 60 per cent amount at the age of 60. From the remaining 40 per cent amount, they need to purchase an annuity plan to get a monthly pension.

The scheme launched in October 2024 and notified in January is a mix of NPS and OPS. The scheme will be implemented on April 1, 2025. It will be available for central government employees, who may also switch from NPS. Existing retired employees following NPS can also switch to UPS.

Like OPS, it offers an assured pension, while like NPS, it also offers market-linked returns. The employee's maximum contribution to their UPS account can be 10 per cent of their basic pay and DA, while the employer's contribution will be 18.5 per cent. The employee's and the employer's 10 per cent contribution each will be invested in market-linked investments, while the employer's 10 per cent contribution will be invested in a pool of assured income corpus. Like OPS, UPS also offers a family pension when the pensioner dies. The family pension will be 60 per cent of the full pension amount.

An employee needs to complete at least 10 years of service to get a UPS pension. They will be offered an assured pension of Rs 10,000. However, on completion of 25 years of service, they are eligible to get a maximum of 50 per cent of their average basic pay and DA. For employees with less than 25 years of service, the pension amount will be proportionate to their service years. The employee will also get a lump sum amount at retirement.

We are calculating OPS and UPS pension at 53 per cent DA rate. Basic Pension: Rs 47,500.00 Dearness allowance: Rs 25,175 Total Pension: Rs 72,675

Rs 43,605

Basic Pension: Rs 47,500 Dearness allowance: Rs 25,175 Total Pension: Rs 72,675

 

Rs 43,605

Rs 7,84,890

Since in NPS, there is no system of an assured pension, we are creating a scenario for an employee to know the pension amount. We are assuming that the person started with a central government Rs 10,000 monthly NPS contribution and increased their amount by 5 per cent every year. The person decides to withdraw 60 per cent corpus and purchase an annuity plan from the rest of the 40 per cent amount. 

Estimated corpus- Rs 2,09,37,863 Estimated lump sum- Rs 1,43,77,568 Estimated monthly pension- Rs 47,110

In that case, the estimated monthly pension will be Rs 1,17,775. However, there will be no lump sum amount.