Unified Pension Scheme vs. Old Pension Scheme: Special Analysis & Calculation
The Unified Pension Scheme is no more confusing, Learn how it differs from the old pension scheme. Discover top key differences with calculation.
In August 2004, the Government of India launched the Unified Pension Scheme, which replaced the National Pension Scheme implemented by Atal Bihari Vajpayee on 01-01-2004. The Unified Pension Scheme (UPS) ensures pensions to 23 lakh people working under the Central Government.
Some employees’ organizations including the opposition party were protesting against the National Pension Scheme. That is why the government will implement the UPS from 1st April 2025.
Protests against UPS started again soon after its announcement and people demanded that the Old Pension Scheme (OPS) be returned. UPS is being opposed mainly by the Congress, All India Trade Unions Congress (AITUC), and Centre of Indian Trade Unions (CITU), while the Bharatiya Mazdoor Sangh (BMS) has said that “they will decide its future course of action after the details of UPS are out”.
Unified Pension Scheme in Details:
- Pension guarantee: 50% of the average salary (Basic + DA) of the last 12 months of retirement is guaranteed as a pension.
- Family Pension: If the person receiving the pension dies, then 60% of his pension amount will be given to his family.
- Minimum Pension: Even if a person has served for 10 years, he will get a minimum pension of Rs 10,000
- Inflation Adjustment: The pension received will keep increasing with inflation
- Lump Sum withdraw: If a person has withdrawn a lump sum amount from his pension fund at the time of retirement then it will not have any impact on his pension amount.
UPS Calculation:
50% of (Basic Pay + DA)
Example: Salary Sheet of Mr. Alok
Salary Sheet
| Basic Pay | 50000 |
|---|---|
| DA | 5000 |
| HRA | 8000 |
| SSA | 7000 |
| TAP | 5000 |
| Gross Salary | 75000 |
If the gross salary is 75000 then the pension will be
Basic Pay- 50000
DA- 5000
55000
50% of (Basic and DA) It will be 27500 P.M
Brief difference between the Unified Pension Scheme and the Old Pension Scheme
- Guaranteed Pension Amount:
In the Old Pension Scheme (OPC), 50% of the gross salary was given as pension. If we look at the example, 50% of the gross salary which is Rs. 75000 i.e. Rs. 37500 was given whereas Rs. 27500 will be given in the Unified Pension Scheme
- Deduction From Salary:
In the old pension scheme, the funds for pensions were provided only by the government. No amount was deducted from the employee’s salary for pension. In the Unified Pension Scheme, 10% of the employee’s basic pay and DA will be deducted for pension. And the government will add 18% more, which was 14% in NPS earlier.
- Tax Deduction:
The amount deducted from the employee for the pension fund will be eligible for tax deduction, which was not the case earlier in the old pension scheme as no amount was taken from the employees.
- Lump Sum Amount Withdraw:
In the old pension scheme, the pension amount was reduced according to the amount withdrawn by the employee in a lump sum at the time of retirement.
But in the Unified Pension Scheme, there will be no effect on the pension even after the employee withdraws the lump sum amount at the time of retirement. because Whatever amount is deposited in the employee’s pension fund, 1/10th of that amount is kept aside every 6 months for lump sum withdrawal at the time of retirement.
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