UPS vs NPS vs OPS: Last-drawn basic pay Rs 70,000; pensionable service 20 years? Know where you may get highest pension

The oldest pension system in India was introduced in the 19th century by Britishers. It went through many transformations over the decades and got its latest form post-independence. Earlier, the retirement age in OPS was 58 years, which was increased to 60 years in 1998. The central government ended OPS for its employees post-2003. Most states also opted out of it, barring a few such as West Bengal. However, many states have reintroduced it as it was part of their election manifesto.

The central government introduced it on January 1, 2004. It means any employee who joined a central government job from this date would get their pension under NPS. Unlike OPS, where the government assures a pension, in NPS, the pension and lump sum depend on an individual's contribution to their NPS account and market returns. For a central government employee, a 10 per cent amount of their basic pay is deducted from their salary to add to their NPS account, while the government contributes 14 per cent to it. 

This promises the minimum assured pension, and extra pension depends on the investments in market-linked investment schemes during working years of an employee. The scheme will be implemented from April 1, 2025. Central government employees may switch from NPS to UPS. Those who are taking their pension under NPS can also make a switch to UPS.

A minimum of 10 years of service is necessary to get a pension under OPS. The employee makes no contribution to any account to get this pension. The last 10-month basic average salary is taken into account for the basic pension. It is 50 per cent of this average basic salary.

The amount contributed by the employer and the employee is invested in market-linked and non-market-linked schemes. An account holder can pick exposure to each of them based on their risk appetite and age. At the age of 60, the NPS account holder can withdraw 60 per cent of the corpus as a lump sum. From the remaining 40 per cent, they need to purchase an annuity plan, the return from which will be their monthly pension. Pre- and post-retirement returns depend on the scheme's performance. 

In UPS, the employee will contribute 10 per cent of their basic pay, while the government will contribute 18.5 per cent. Of a total contribution of 28.5 per cent, 20 per cent will be invested in a market-linked scheme, while 8.5 per cent will be invested in a fixed return scheme for an assured pension. The minimum assured pension is Rs 10,000 on completion of 10 years of service, while one can get 50 per cent of their last-drawn average basic pay on completion of at least 25 years of service. The UPS account holder also gets a lump amount on retirement.

In that case also, the government will assure a minimum pension, making contributions from its side.

In such a situation, the employee will get an extra pension than the assured pension.

For such an employee, the basic pension will be Rs 35,000 (excluding dearness relief). Along with that, the pay will increase.

The family pension in such a case will be Rs 21,000 (excluding DR).

In such case, the minimum assured pension (including DR) will be Rs 42,840.00.

The minimum assured family pension (including 53% DR) will be Rs 25,704.00.

The estimated lump sum amount for such a person will be Rs 4,28,400.00.

In NPS, it depends on the employee and employer contribution. So, we are assuming that the person started with a Rs 5,000 monthly contribution, increased the amount by 5 per cent every year for 20 years, and picked 75 per cent equity and 25 per cent debt exposure, the estimated monthly pension in such a scenario will be Rs 10,610.