UPS VS NPS VS OPS (Syllabus: GS Paper 3 – Economy)

Context: The Union Cabinet approved the Unified Pension Scheme (UPS), which will provide government employees with as- sured pension after retirement. The scheme will be effective from April 1, 2025, according to the government announcement.

Unified Pension Scheme (UPS)

• About: The UPS promises retirees a fixed pension, unlike the NPS. This was one of the major criticisms of the NPS.
• Key Features: 

o Assured Pension: Guarantees 50% of the employee’s average basic pay from the last 12 months before retirement, with a minimum qualifying service of 25 years. This amount decreases proportionately for shorter service periods, down to a minimum of 10 years.

o Assured Minimum Pension: Ensures a minimum pension of ₹10,000 per month if the employee retires after a minimum of 10 years of service.

o Assured Family Pension: Provides 60% of the retiree’s last drawn pension to their immediate family upon the retiree's death.

o Inflation Indexation: Pensions are adjusted for inflation using the All India Consumer Price Index for Industrial Workers, similar to the adjustment for serving employees.

o Lumpsum Payment at Superannuation: An additional benefit, calculated as 1/10th of the monthly emolument (pay plus dearness allowance) for every six months of completed service, paid along with gratuity.

Old Pension Scheme (OPS)

• About: Pension to government employees at the Centre as well as states was fixed at 50 percent of the last drawn basic pay.
• In addition, there was Dearness Relief — calculated as a percentage of the basic salary — to adjust for the increase in the cost of living.
• The OPS was abolished at the Centre in 2003 and the National Pension Scheme (NPS) came into force on April 1, 2004.

New Pension Scheme (NPS)

• About: It was launched in January 2004 for government employees and was opened to all sections in 2009.
• It laid in its promise of an assured or ‘defined’ benefit to the retiree. It was hence described as a ‘Defined Benefit Scheme’.
• Also known as: National Pension Scheme.
• Replaced: Old Pension Scheme (OPS)
• Introduced by: The Atal Bihari Vajpayee government.