The central government is bringing a new pension scheme for employees. This scheme is UPS or NPS. The draft of UPS is being prepared. This guideline will be made this month. Employees will have to choose one of UPS or NPS. UPS will start on 1 April 2025. In UPS, the employee will invest in the entire pension fund. A lump sum amount will not be received on retirement. The government will increase its contribution. If compared to NPS, UPS will provide more pension, but it will not be as much as the old pension scheme. This scheme is to provide better financial security to the employees after retirement.
For how long will the employee get the option
The draft of UPS is being prepared. On the basis of which the final guideline will be made. It is expected to be ready soon. After this, employees will get an option to choose between UPS or NPS. This scheme will be implemented soon.
What new thing does this scheme bring
One special thing about UPS is that the employee will get the option to invest 100% of the amount deposited in its fund. In NPS, the employee can invest up to 50% of the amount through 12 service providers suggested by the government. Central employees will not have the option of withdrawing lump sum amount at the time of retirement in UPS. Their entire deposited amount will be used for creating pension. The government will also increase its contribution in UPS. The government contributes 14% in NPS, whereas in UPS it will be 18.50%. The employee’s contribution will remain 10% only. Thus, 24% amount is deposited in NPS. In UPS it will be 28.50%.
What is better – UPS or NPS
Only 20% of the amount will go to the pension fund and the remaining 8.50% will be deposited in a separate pool. This amount will be used if there is a 50% reduction in the employee’s pension at the time of retirement. This will ensure that the employee gets at least 50% of his last salary as pension.
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As a pension option, UPS is better than NPS. In UPS the pension amount can increase. Whereas in NPS it is uncertain. It is not as good as the old pension scheme.
What about 8.50% amount in UPS
If the pension generated from the amount deposited in the annuity is less than 50% of the employee’s last salary, then this pool amount will be used – for example, if the last salary of an employee is Rs 1 lakh and the pension generated from the annuity is Rs 46,000, then the remaining Rs 4,000 will be given to the pool fund.
Pension after death of employee
After the death of the employee, his wife will be given pension. If his wife wants to take a lump sum amount, she will get it from the pool fund amount. If she wants to take pension, she will not get this amount. After the death of the wife, the amount deposited in the pool fund will be given to the dependent, but he will not get pension. This arrangement is also there in NPS.
UPS is a better option by combining NPS, which provides better pension and investment flexibility to the employees. Employees should choose either of the NPS and UPS as per their needs and financial situation.