The Pension Fund Regulatory and Development Authority (PFRDA) has introduced a new Unified Pension Scheme (UPS) Calculator to help central government employees estimate their pension benefits under both the National Pension System (NPS) and the UPS. This user-friendly calculator is designed to help people make well-informed decisions when selecting their pension plan.
Effective from April 1, 2025, the Unified Pension Scheme will apply to all new central government employees, offering a more stable and predictable pension payout than the market-linked NPS. Current NPS subscribers also have the option to transition to UPS if they choose. Aimed at ensuring long-term financial security through assured pension benefits, the scheme emphasizes the importance of understanding one’s retirement outlook. The UPS Calculator plays a key role in this, providing transparency and clarity on expected pension payouts.
Pension under Unified Pension Scheme: How the UPS calculator works
To know how the UPS calculator works, a central government employee needs to know certain terminologies. These are as follows:
- Retirement age: Enter your superannuation age (in years) to set the timeline for calculations. This is the age when you will retire from the central government job.
- Monthly Basic Pay: Input your current basic pay, which determines contribution amounts.
- Existing NPS Tier 1 corpus: If you’re an NPS subscriber, provide your current Tier 1 corpus to factor in existing savings.
- Monthly contribution: Specify the amount you plan to contribute monthly until retirement.
- Based on these inputs, the calculator estimates:
- Projected corpus at retirement: The total accumulated amount by the time you retire.
- Monthly pension: The tentative monthly pension under UPS or NPS, based on annuity rates and scheme rules.
- Lump Sum Amount: The withdrawable amount at retirement, which varies between the two schemes.
Here is an example to understand this.
- Current age of employee: 44
- Employee’s age when joining: 24
- Date of joining: Joined in May 2005. He has 35 years of qualified service.
- Retirement age: 60 (default assumption)
- Monthly Basic pay today: Rs 40,000 (Assumption)
- Existing NPS Tier 1 corpus: Rs 10 lakh (Assumption)
- Annual Basic pay growth rate: 5% (default assumption)
- Annual Dearness Allowance (DA) growth rate: 3% (Assumption)
- Expected return on investment: 10% (Assumption)
- Final Lump sum withdrawal percentage: 60% (default assumption)
- Annuity rate after retirement: 6.5% (default assumption by calculator )
- Life expectancy: 78 years
- Surviving spouse’s life expectancy: 80 years
Comparing NPS and UPS
UPS Payout: Rs 32,360 + Dearness Relief
NPS Payout: Rs 29,762
(i) Lumpsum Payout at Superannuation
UPS: Rs 13,44,160
NPS: N/A
(ii) Final Withdrawal Payout at Superannuation
UPS: Rs 72,87,263
NPS: Rs 82,41,741
(iii) Total monthly payouts to subscribers in retirement phase
UPS: Rs 1,06,52,263
NPS: Rs 71,42,842
Aggregate expected benefits to be received by the subscriber
(i + ii + iii)
UPS: Rs 1,92,83,686
NPS: Rs 1,53,84,584
When all benefits are aggregated—including lump sum, final withdrawal, and retirement-phase monthly payouts—UPS offers a total of Rs 1.92 crore, surpassing the Rs 1.53 crore expected under NPS.
What is the Unified Pension Scheme (UPS)?
It is a ‘fund-based’ payout system which relies on the regular and timely accumulation and investment of applicable contributions (from both the employee and the employer (the Central Government)) for grant of monthly payout to the retiree.
What is the rate of contribution of employees and the Central Government under UPS?
According to the UPS FAQs, “The contribution of employees will be 10% of (basic pay + Dearness Allowance). The matching Central Government contribution will also be 10% of (basic pay + Dearness Allowance). Both will be credited to each employee’s individual corpus. Further, the Central Government shall provide an additional contribution of an estimated 8.5% of (basic pay + Dearness Allowance) of all employees who have chosen the UPS option, to the pool corpus on an aggregate basis. The additional contribution is for supporting assured payouts under the UPS option.”
