Pension Calculator: 5 Key Differences Between UPS and OPS — Check Here

The Government of India has announced the Unified Pension System (UPS), a new pension scheme for employees working for the government. The new scheme will provide a secure pension plan that will benefit nearly 90 lakh pensioners who are dependent on the central government.

The central government launched the UPS to meet the demands of the employees in relation to a lower corpus and lower returns from the National Pension System (NPS) and the reduction of the Old pension system (PAHO).

Below are five key differences between UPS and OPS:

1. Differences in pension calculation: The Old Pension System (OPS) and the Unified Pension System (UPS) have different ways of calculating the pension amount. In the old system, the insured pension was set at 50 percent of the last base salary plus Dearness allowance (DA). Compared to the new UPS plan, the pension assured in UPS will be the average basic salary plus the DA received in the year before retirement. This means that when government employees retire, they will receive 50 percent of the average salary of the previous year plus the DA. If an employee receives promoted at a higher pay scale in recent months, they will receive a slightly lower amount, as it would be 50 percent of the average for the last year.

2. Employee Contribution to UPS: Under the UPS plan, an employee must contribute a portion to the pension fund, similar to an employee contribution to the National Pension System (NPS). The contribution amount is 10 per cent of the basic salary, and the DA under UPS and the government will also contribute 18.5 per cent, compared to 14 per cent earlier for UPS, according to a Times of India report. In OPS, employees did not make any contributions.

3. Tax benefits: Central government employees are entitled to tax benefits on the government’s contribution to the NPS system. They can deduct 14 percent as per the Income tax Law of 1961, both the old and new tax regime. Since there were no contributions from employees to the OPS, they cannot obtain tax benefits.

4. Highest minimum pension at UPS: Under the UPS scheme, the minimum pension offered per month is ₹10,000 at the time of retirement after a minimum service of 10 years. The current minimum amount is ₹9,000 after the minimum ten-year service period.

5. Global Payments: Under the UPS, lump sum The payments are offered at the time of retirement. They will be calculated as one-tenth of the monthly salary plus DA, as at the date of retirement, for every six months of service completed. It will not reduce the pension amount, the government statement said. Unlike the OPS, which allows lump sum collection at retirement through commutation of pension, which reduced the pension amount.

According to PAHO, a government employee can travel part of the day pensionwhich does not exceed 40 percent, in a single payment. However, there are common characteristics between the Unified Pension System (SPU) and the Old Pension System (SPA).

The availability of inflation-indexed pensions to compensate for rising costs of living is a common feature in UPS and OPS schemes. In the OPS, the pension is reviewed twice a year, on 1 January and 1 July, when the government announces a hike In case of dearness allowance and relief under UPS, inflation indexation will be applied to the minimum pension amount and dearness relief to the All India Consumer Price Index for Industrial Workers (AICPI-IW), so it will also be given to service sector employees under the scheme, the government said.