Unified Pension Scheme (UPS) Calculator [2024]

What is the Unified Pension Scheme (UPS)?

A Unified Pension Scheme (UPS) for 23 lakh central government employees has been approved by the cabinet.

The new scheme, which will come into effect from April 1, 2025, offers several post-retirement inflation-linked increments, a baseline minimum pension of INR 10,000, and a pension equal to 50% of their last drawn salary for people who have served for 25 years or more.

How to Use the UPS Calculator?

The Unified Pension Scheme (UPS) Calculator is designed to be user-friendly, providing central government employees with an easy way to forecast their pension benefits. Here’s a step-by-step guide on how to use it:

Last Drawn Salary: Input the basic pay from the last 1 year of your service. This figure is essential for calculating the final pension amount.

Total Years of Service: Enter the total number of years you expect to serve by the time of your retirement. This duration must be at least 10 years to qualify for any pension under UPS.

Calculate Pension: After entering all the necessary details, submit the information to calculate your estimated pension.

Unified Pension Scheme (UPS) Calculation Formulas

The pension under Unified Pension Scheme is calculated using the following formulas:

1. Basic Pension Calculation:

This formula applies if the employee has completed 25 or more years of service. For employees who served less than 25 years but more than 10 years, the pension is calculated proportionally.

2. Minimum Pension Guarantee: If the calculated pension is less than INR 10,000, the pension will be raised to this minimum guaranteed amount, ensuring that all retirees have a basic financial safety net.

Examples of Unified Pension Scheme (UPS) Calculations

Example 1: Full Service (25 Years or More)

• Last Basic Pay: INR 40,000
• Service Years: 30 years

Using the formula:

Example 2: Partial Service (Between 10 and 25 Years)

• Last Basic Pay: INR 40,000
• Service Years: 20 years

Example 3: Minimum Pension Guarantee

• Last Basic Pay: INR 15,000
• Service Years: 10 years

Since this amount is below the minimum guarantee, the pension will be uplifted to INR 10,000.

These examples demonstrate how the Unified Pension Scheme calculator can be an essential tool for government employees to plan their retirement effectively.

By understanding the formulas and how various factors like service duration and last drawn salary impact the final pension amount, employees can make informed decisions about their retirement planning.

Comparing the Unified Pension Scheme (UPS) with the National Pension System (NPS)

There are five important differences between the UPS and NPS, which include differences in pension calculation, employee contribution to UPS, tax benefits, higher minimum pension in UPS, and lump sum payments.

Cabinet Secretary-designate TV Somanathan gave the details of the Unified Pension Scheme (UPS). Its benefits will accrue to persons retiring by March 31, 2025, and will also include the payment of any arrears.

The employees will have the option to opt for the UPS or NPS from the upcoming financial year.

The pension will be calculated as follows: Employees who have completed 25 or more years of service will receive a pension which will be 50% of the basic pay from the last 1 year of service.

For employees with a service of 10 to 25 years, the pension will be calculated proportionately based on their service duration.

The earlier National Pension System (NPS) involved a process where the pension is calculated upon the returns generated from contributions invested in debt and equity instruments.

Since the calculations are based on market performance, the minimum pension under the NPS is not fixed.

The UPS, on the other hand, guarantees a minimum pension of ₹10,000 per month for employees who have served for at least 10 years.

It thus provides a basic level of financial security, especially for Class III and Class IV employees.

Individual contribution:

In the NPS, the employee contributed 10% of his basic salary while the government contributed 14%. In the UPS, the government’s contribution will increase to 18.5% while the employee’s contribution will remain 10%.

Family security:

The UPS has also increased the family pension in the unfortunate instance of the pensioner passing away to 60% to ensure continued financial assistance for their dependents.

The NPS family pension regimen is calculated by the accumulated corpus in the pension fund and the annuity plan selected at the time of retirement.

The NPS has two different account regimens:

Regimen 1: A mandatory pension account with tax benefits.

Regimen 2: An optional investment account linked to Tier-1, offering flexibility for withdrawals.

Lump Sum Payment At Superannuation:

The one-time sum payout on superannuation or gratuity will be calculated as before, which is one-tenth of the monthly pay plus DA as on the retirement date, calculated based on every six months of service.

Under the NPS, employees can withdraw a maximum of 60% of the total corpus on retirement, and the remaining 40% will be given as a pension every month.

Eligibility:

All central government employees are eligible for Unified Pension Scheme (UPS), while the National Pension Scheme (NPS) is available for both government and private employees except the armed forces.

Compensation For Inflation-Induced Increasing Cost of Living:

There are measures to compensate for inflation-induced increasing cost of living in both the NPS and UPS.

In the NPS, the pension is revised twice every year, once on January 1 and July 1 when the government announces a hike in DA.

In the UPS, the indexation of inflation will be calculated on the All India Consumer Price Index for Industrial Workers (AICPI-IW), and the dearness allowance and relief will be added to the minimum pension amount.

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