UPS vs OPS vs NPS: How Is Unified Pension Scheme Different

In a move that will change the course of pension schemes in India, the government on Saturday approved the Unified Pension Scheme, which is said to be a mix of the previous two schemes.

The Unified Pension Scheme provides government employees an assured 50% of the basic average pay drawn over the last 12 months before retirement, for a minimum service of 25 years. This is similar to the Old Pension Scheme.

UPS assures Rs 10,000 minimum pension per month after 10 years of service, while OPS did not specify a minimum pension amount.

Among other benefits, the new scheme also provides 60% of pension to the family after the employee's death. OPS also provided a family pension, but typically at a lower percentage of the employee’s pension, which makes the UPS more attractive.

The pension will also be adjusted based on All India Consumer Price Index for Industrial Workers. The Old Pension Scheme did include dearness relief for inflation adjustments, but the system was less standardised, compared to the AICPI-IW approach of the UPS.

Further, it also provides lump-sum payment such as 1/10th of monthly emoluments for every six months of service in addition to gratuity.

The new scheme combines features of both the New Pension Scheme and the Old Pension Scheme, as it offers fixed pension guarantees like the OPS, but incorporates elements of NPS by introducing a contributory model.

The UPS was introduced as there was growing dissatisfaction with NPS, along with political pressures. In 2023, a committee chaired by TV Somanathan held over 100 meetings, which resulted in the proposal of UPS.

All government employees retiring from April 1, 2025 onwards, as well as those who retired under NPS from 2004 are eligible for the UPS. Government employees retiring under NPS, will also have an option to switch to UPS, with arrears adjusting to the new scheme.