Unified pension scheme (2025) vs New pension scheme which is the best for middle class

 

About UPS-

 

The scheme will be effective from April 1, 2025. Central government employees will be able to choose between the National Pension Scheme (NPS) and the Unified Pension Scheme (UPS). Moreover, existing central government NPS subscribers will also have the option to switch to the UPS.

 

 

·       Assured Pension: 50% of the average basic pay drawn over the last 12 months prior to superannuation for a minimum qualifying service of 25 years

·       Proportionate for lesser service up to a minimum of 10 years of service

·       Assured Family Pension @60% of pension of the employee immediately before her/his demise

·       Assured Minimum Pension @10000 per month on superannuation after minimum 10 years of service

·       Inflation Indexation: On assured pension, on assured family pension and assured minimum pension Dearness relief based on All India Consumer Price Index for Industrial Workers (AICPI-W) as in case of serving employees

·       Lump-sum payment at superannuation in addition to gratuity

·       1/10th of monthly emolument (pay + DA) as on the date of superannuation for every completed six months of service

·       This payment will not reduce the quantum of assured pension

·        While announcing the details of the scheme, Union Minister Ashwini Vaishnaw said that the Centre constituted a committee that held 100 meetings with several top organizations, including the RBI and the World Bank, to make decisions on this scheme, which will benefit 23 lakh central government employees.

The Minister further said that the government employees will have the option to choose between the New Pension Scheme and UPS.

·        "PM Modi constituted a committee under the chairmanship of Cabinet Secretary TV Somanathan. This committee held more than 100 meetings with different organisations and nearly all the states. There's a difference between how PM Modi works and the oppositions works," Vaishnaw said.

 

 

About NPS-

 

1.   The New Pension Scheme will work on defined contribution basis and will have two tiers – Tier I and Tier II.

2.   Tier-I is mandatory for all Govt. servants joining Govt. service on or after 1.1.2004.  In Tier I, Govt. servants will have to make a contribution of 10% of his Basic Pay, DP and DA which will be deducted from his salary bill every month by the PAO concerned.  The Govt. will make an equal matching contribution. Tier I contribution will be kept in a non withdrawal Pension Tier I account.

3.   Tier II will be optional and at the discretion of Govt. servants.  Tier II contributions will be kept in a separate account that will be withdrawal at the option of Govt. servant.  The scheme of voluntary contribution under Tier II will not be made operative during the period of interim arrangement and therefore no recoveries will be made from the salaries of the employees on this account.

4.   The existing provisions of Defined Benefit Pension and GPF would not be available to new Govt. servants joining Govt. service on or after 1.1.2004.

5.   An independent Pension Fund Regulatory and Development and Authority (PFRDA) will regulate and develop the pension market.

6.   As an interim arrangement till such time the statutory PFRDA is set up and interim PFRDA has been appointed by issuing an executive order by Ministry of Finance(DEA).

7.   It has also been decided that Tier II will not be made operative during interim period.

8.   Till the regular Central Record Keeping agency and Pension Fund Managers all appointed and the accumulated balances under each individual are transferred to them, it has been decided that such amounts rep[resenting the contributions made by the Govt. servants will be kept in the Public Account of India .  This will be a temporary arrangements as announced by the Govt.

9.   A Govt. servant can exit at or after the age of 60 years from Tier I of the Scheme.  At exit, it would be mandatory for him to invest 40% of pension wealth to purchase an annuity (from an IRDA regulated Life Insurance Company), which will provide for pension for the life time of the employee and his dependent parents/ employee.  In case of Govt. servants who leave the scheme before attaining the age of 60, the mandatory annuitisation would be 80% of the pension wealth.

10.                   Recoveries towards Tier I contribution will start from salary of the month following the month in which the Govt. servant has joined service.  Therefore, no recovery will be effected for the month of joining.

11.                   No deductions will be made towards GPF contribution from the Govt. servants joining the service on or after 1.1.2004 as the GPF scheme is not applicable to them.

12. It has been decided that pending formation of a regular Central Record Keeping Agency, Central Pension Accounting office(CPAO) will function as the Central Record Keeping Agency for the above scheme.

 

Expert Recommendations-

In first look it is clearly showing that the UPS is much safer than NPS in many aspects . Govt has tried to include many points of old pension scheme in UPS-2025. But lets wait and watch that how govt is going to implement it.