The central government led by Prime Minister Narendra Modi has given a great gift to the government employees on the pension front. This gift will benefit all the government employees who are unhappy with the National Pension Scheme (NPS). For this, the government on Saturday announced the launch of the Unified Pension Scheme (UPS), which is being presented as an alternative to the National Pension Scheme.
Unified Pension Scheme is not a default, it is an option
The government has not introduced the Unified Pension Scheme (UPS) as a default. When the National Pension Scheme was launched about two decades ago, it replaced the old pension scheme (OPS). That is, NPS was made the default pension scheme in place of OPS. Now UPS has been introduced not as a default but as an option. This means that all eligible government employees will get the facility to choose their preferred option between NPS or UPS.
The debate intensified during the Lok Sabha elections
The debate on OPS vs NPS has contributed the most in preparing the ground for the introduction of UPS. A section of government employees had been demanding the reinstatement of the old pension scheme for a long time. Many political parties were making the pension dispute an election issue, the echo of which was also heard during the recently held Lok Sabha elections. Before that, many state governments had distanced themselves from NPS and reinstated OPS.
Pension guarantee for government employees
Now the name of UPS has also been added to the old debate of OPS vs NPS. Before comparing the three schemes, let us first know about the benefits given in the Unified Pension Scheme. In this scheme, pension equal to half of the basic salary is guaranteed for those who have worked for at least 25 years. Its calculation will be done according to the basic average salary of the last 12 months before retirement. In case of at least 10 years but less than 25 years of service, pension will be calculated on the basis of proportion. Those who have worked for at least 10 years are getting a guaranteed monthly pension of Rs 10,000 in this scheme. Family pension is also guaranteed in this, which will be equal to 60 percent of the payment received at the time of the pensioner’s death.
Lump sum payment will be given along with gratuity
Overall, Unified Pension Scheme (UPS) means ‘Assured Pension, Minimum Pension, Assured Family Pension’. In Unified Pension Scheme, apart from gratuity, the government has also made provision for lump-sum payment. This payment will be calculated on the basis of every 6 months of service. The amount will be equal to 10 percent of monthly pay plus DA for every 6 months of service. That is, if a person works for 10 years, he will get a lump sum payment for 20 half-years. To calculate this, DA has to be added to one-tenth of the monthly salary and multiplied by 20.
UPS is a combination of OPS and NPS
Talking about UPS, in a way the government has tried to strike a balance between NPS and OPS. In OPS, the retiring employee used to get 50 percent of his last salary as pension. Such a guarantee has been given in UPS as well. There was no such guarantee in NPS, rather the pension amount is being determined according to the contribution. The provision of gratuity has also been retained in UPS. In the old pension scheme, there was a provision of GPF i.e. General Provident Fund for the employees, from which they used to get a lump sum payment at the time of retirement. Equivalent to this, a provision for lump sum payment has also been made in UPS. In NPS, employees can choose lump sum payment and part of monthly pension in their contribution. In NPS, a maximum of 60 percent of the fund can be withdrawn in lump sum, while the remaining at least 40 percent of the fund has to be used to buy annuity, which provides monthly pension.
Also read: Who will get the biggest benefit from Modi government’s new pension scheme, how to avail the benefit, know step-by-step
