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It’s important to note that the calculations are based on certain assumptions and it is best to make individual calculations to arrive at the best choice between UPS and NPS for yourself.

UPS introduces two significant changes that make it an appealing option for employees.

One of the key features is the inclusion of a fixed, guaranteed pension payout after retirement.

Employees who have worked for 25 years or more will receive a pension equal to 50% of their average pay for the last 12 months of their service.

Even those who have served for a minimum of 10 years will be entitled to a pension of Rs 10,000 per month.

This guaranteed pension provides a safety net for retirees, unlike the NPS, where the pension amount is solely dependent on the accumulated corpus and is subject to market fluctuations.

UPS does not require subscribers to purchase an annuity after retirement, making the pension payout process more straightforward and less restrictive compared to the NPS.

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UPS offers a one-time payment upon retirement, in addition to gratuity benefits.

The sum is determined by calculating one-tenth of the employee's monthly emoluments, which include basic pay and dearness allowance, at the time of superannuation.

This calculation is performed for each six-month period of service rendered by the employee.

In the unfortunate event of an employee's passing, the UPS guarantees a pension to the family, amounting to 60% of the pension the employee would have been eligible for at the time of their demise.

This differs from the NPS, where the family pension is based on the accumulated corpus in the employee's account.

UPS vs NPS Benefits: According to calculations performed by UTI Pension fund for TOI, employees joining UPS with a monthly salary of Rs 50,000 and experiencing an annual increment of 3% can anticipate a pension increase of approximately 19%.

This projection assumes a compounded annual growth rate of 8% for their pension corpus, which is lower than the returns offered by all three fund managers associated with the scheme.

The size of the corpus is likely to be larger than estimated, as the calculations do not account for the dearness allowance during the service period and the pay commission awards.

Moreover, the monthly pension payment does not consider the effect of dearness relief, which is an adjustment for inflation that the government guaranteed to all employees who entered service from 2004 onwards and are members of the NPS.

UPS vs NPS: NPS offers some benefits over UPS, despite the latter's advantages.

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The assumptions in the above calculations are: The accumulated corpus in the NPS at age 35 is Rs 15 lakh, and at age 45, it is Rs 40 lakh.

The monthly basic salary at age 35 is Rs 50,000, and at age 45, it is Rs 1 lakh.

The annuity rate with 25 years left for retirement is 4.75%, and with 15 years left, it is 5.5%.

The return from a systematic withdrawal plan with 25 years left is 6%, and with 15 years left, it is 7%.

The yearly pension increase is assumed to be 4%.

In contrast to the Old Pension Scheme (OPS), which did not require employee contributions, the UPS involves employee contributions.

Employees will contribute 10% of their basic pay plus dearness allowance.

The government’s contribution will also increase from 14% to 18.5%.

Of this 18.5% contribution, 8.5% will be allocated to a separate Guarantee Reserve Fund, designed to cover any potential shortfalls in commitments.

In NPS, the government contribution is 14% of pay.

UPS vs NPS: Experts are of the view that NPS offers greater flexibility when it comes to investing and withdrawing funds.

Under NPS, the exposure to equities can be increased or decreased any time.

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NPS has also recently introduced the option for subscribers to initiate a systematic withdrawal plan, as an alternative to receiving a lump-sum payout.

UPS vs NPS: The tax implications remain somewhat unclear.

With NPS, retirees can withdraw up to 60% of their accumulated corpus without incurring taxes.

The remaining 40% must be allocated to an annuity, which provides a pension subject to income tax based on applicable slab rates.

The tax implications for lump-sum withdrawals under UPS are not yet clear, but pension income will be taxed according to slab rates.

UPS vs NPS: Experts say that for central government employees who want a reliable and foreseeable income after retiring, the UPS is the best choice.

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Employees approaching retirement age should seriously consider switching to the UPS, they say.

UPS vs NPS: To sum it up, government employees who switch to UPS can hope to see a big increase in their pension.

The NPS will provide a larger retirement corpus, while the UPS will offer a higher monthly pension that increases over time.

NPS grants you a higher level of control by allowing you to select from various asset classes and fund managers.

UPS lacks such flexibility.

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