Everything to Know About Unified Pension Scheme (UPS) in Q&A Form along with Illustrations
- fabgyan2018
- Sep 23, 2024
- 6 min read
Updated: Jan 28
In this article we have attempted to answer all the questions and doubts related to Unified Pension Scheme (UPS) in Q&A Form based upon Notification and Draft PFRDA Regulations (copy attached in the end of the article). We will continue to update the information in this article with more information coming into Public Domain.
For Scenario Analysis between NPS and UPS based on different combinations along with Dynamic Calculator including all possible attributes, please read at :
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Question-1: What will be the contribution Rate of Central Government Employees and Government in Unified Pension Scheme.
Answer-1: There will be two kind of Accounts to be opened in Unified Pension Scheme:
Individual Corpus Account: This account will be mapped to individual employee with its PRAN. In this account both Central Government Employees and Central Government will contribute monthly @ 10% of (Basic plus DA) respectively. Amount of contribution in this account will be fixed i.e. 10% only.
Reserve Pool Account: This will be common pool of resources in which Government alone will contribute monthly @ 8.5% of (Basic plus DA) as of now. Requirement of Contribution in this fund will be assessed every three years and accordingly, contribution may increase or decrease. The purpose of this fund is work as a buffer to fund the possible gap between assured pension and annuity earned from the corpus.
Question-2: What will be the Assured Pension Amount in Unified Pension Scheme with the help of illustrations.
Scenario-1 (When Service is 25 years or more): In this Case, Assured Pension Amount will be 50% of Average Basic of Last 12 months preceding date of superannuation.
For Example:
Basic Salary on Date of Superannuation: Rs. 1,03,000 (30.09.2024)
Basic Salary in July & August: Rs.1,03,000 (1st July being date of increment)
Basic Salary from Jan to June: Rs.1,00,000 (1st January being date of promotion)
Basic Salary from Oct to December: Rs.90,000
Average Basic Salary of Last 12 months: (1,03,000*3+1,00,000*6+90,000*3)/12
: 98,250
Assured Pension= 98,250*0.50
= Rs.49,125/-
Scenario-2 (When Service is 10 years or more but less than 25 Years): In this Case, proportionate reduction in assured pension will be there based upon years of service subject to minimum pension of Rs.10,000 per month.
Scenario-3 (When Service is less than 10 years): No Minimum pension nor assured pension.
Question-3: Whether Dearness Relief will also be there on Assured Pension.
Answer: Yes over and above Assured Pension, Minimum Pension and Family Pension, Dearness Relief as being calculated based on AICPI-IW will be provided similar to serving employees.
Question-4: Whether Pension will be Revised based on Recommendations of Future Pay Commissions after retirement of Employee like in case of Old Pension Scheme.
Answer: As per Notification, Assured Pension will not be revised based on future Pay Commissions after retirement of Employee.
Question-5: What would be other payments to be made to the Employees at the time of retirement.
Answer: At the time of Retirement, apart from Gratuity and Leave Encashment, following payment will also be made to the Central Government Employees:
Lump Sum Payment equal to 1/10 of monthly (Basic and DA) at the time of superannuation for each completed six month of service. This will not reduce the Assured Pension committed as per details in Qns-2 above.
For Example:
Basic Salary at the time of Superannuation: Rs. 1,00,000/-
DA at the time of Superannuation: Rs.50,000/-
Service Period: 30 Years 3 months
Lump Sum Payment= (1,50,000)*10%*60
= Rs. 9,00,000/-
Question-6: Can I withdraw any amount from Retirement Fund at the time of retirement?
Answer-6: As per Notification and draft regulation by PFRDA, amount up to maximum of 60% can be withdrawn from Individual Corpus (Fund accumulated from 10% contribution each from Self and Government. In that case, proportionate reduction in assured pension amount will be there.
For instance, If we decide to withdraw 50% of Individual Pension Fund at the time of retirement, assured pension will be 25% of Average Basic of Last 12 months preceding date of superannuation.
Question-7: Would Assured Pension will be available in case of VRS ?
Answer-7: Yes Assured Pension benefits will be available to the officers opted for VRS from the Government service based on tenure of the service as explained above. However, in case of VRS, Pension will start from the actual day of superannuation. Further, even lump sum amount and withdrawal from corpus will be allowed on the due date of superannuation only.
For instance, if One is due for superannuation on 31.08.2050 but he took VRS on 31.08.2044 after completion of 25 years of service. In this case, he will be eligible for 50% of average basic of 12 months at the time of VRS (31.08.2044), but payable from September-2050.
Question-8: What would be the benefits available to the spouse in case of Death of the Employee?
Answer-8:
Death during Service:
In case unfortunately death of Employee happened during service, as of now there is no clarity on this aspect in the notification. However, in our opinion, in this case benefit of old pension scheme may be granted like has been granted in case of NPS.
In our opinion, like for NPS such benefit was extended in the Central Civil Services (Implementation of National Pension System) Rules, 2021 notified by the DoPT, it will also come up with similar rules for UPS also.
Death after Retirement: In this case, Family Pension equivalent to 60% of the Pension amount has been assured along with Dearness Relief.
In this case, Family pension will only be allowed to Spouse legally wedded as on the date of superannuation or on the date of voluntary retirement or retirement under FR 56(j).
Question-9: Whether UPS will be optional or mandatory?
Answer-9: For existing NPS employees, it will be optional and one time option will be given to choose between NPS and UPS. For future recruits also, It will be optional.
Question-10: Can I select my investment choice (like equity percentage etc.) for investment of pension fund or there will be default investment choice ?
Answer-10: As Notification, there will be one default investment choice but Employee will be allowed to opt for active choice of investment for his Individual Pension Account.
In case Employee opts for active choice of investment, there can be two scenarios:
a. Actual Corpus of the Individual Pension Account will be more than Benchmark Corpus (Amount which would have been if default option is opted)
In this case, Employee will be allowed to withdraw that excess amount from the individual corpus without reducing the amount of pension.
a. Actual Corpus of the Individual Pension Account will be less than Benchmark Corpus (Amount which would have been if default option is opted)
In this case, Employee will have option either to bring this gap amount and deposit the same with the Government and get full assured pension.
In case Employee decides not to fill the gap, his assured pension amount will be reduced proportionately.
For instance, benchmark corpus is 1 Crores and actual corpus is 90 Lakhs. His assured pension amount as per normal calculation is 50,000.
In this case, if Employee brings 10 Lakhs he will get pension of Rs. 50,000 plus DR, else he will get pension of Rs. 45,000 (i.e. 50,000*90/100) plus DR.
Question-11: What will happen to the officers who have already retired from the Government service?
Answer-11: All employees who have already retired from service under NPS can take benefit of UPS. Arrears will be paid to them as per calculation methodology of UPS after adjusting the benefits already withdrawn by them under NPS.
Question-12: What will happen to the fund after death of both Employee and Spouse.
Answer: Under NPS, the fund against which annuity is purchased is given to heirs of the Employee after death of both Employee and the spouse.
In UPS as per Notification, fund accumulated in Individual Corpus account after withdrawal (maximum 60%) will be deposited with the Government in Pool Corpus Account from which assured pension will be paid out to the Employee and his spouse.
After demise of both the Employee and his spouse, fund will not be be returned.
Question-13: Whether shifting to UPS is beneficial from NPS who has long service lets say 30 Years.
Answer: Financially considering the return of the fund to the heirs of Employees in NPS, UPS may not be financially beneficial in many of the cases.
However, considering the social security the UPS provides during life time of Employee and Spouse, in our opinion, UPS is beneficial combined with withdrawal of fund in the range of 40-50% at the time of retirement.
For Complete Scenario Analysis between UPS and NPS along with dynamic Calculator on NPS & UPS including all possible attributes like annual increase in salary, life expectancy of Self and spouse, inflation etc., Please read at :
Copy of Notification
Copy of Draft Regulation
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