The central government has introduced the option of Unified Pension Scheme (UPS) for its employees coming under the National Pension System (NPS).
In this scheme, employees get assured payment after retirement.
This means that their pension will not depend on the performance of the stock market and debt market. Here, NPS is a market linked pension scheme, in which the pension of the employee depends on the performance of the stock market and debt market. UPS assures a minimum pension of Rs 10,000 every month.
UPS will come into effect from April 1, 2025. If the employees coming under NPS select UPS once, then they will not have the option of using NPS again. There is a formula to calculate pension in UPS. With this formula, a person can calculate his pension.
Payout = 50% of X (Sum of 12 months' basic pay/12)
This formula can be used only when the employee has 25 years or more of service left. If the service left is less than 25 years, then the payout will be in proportion to that. If the employee takes voluntary retirement after 25 years of service, then the payout will start from the original date of retirement.
This can be understood with the help of an example. An employee can be in one of three situations. In the first situation, assume that the employee has 25 years of service or more. In this situation, assume that the employee's average basic pay at the time of retirement is Rs 12,00,000. According to the formula, this amount has to be divided by 12. This will give the average basic pay of 12 months as Rs 1,00,000. This will have to be multiplied by 50%. This way the employee will get a pension of Rs 50,000.
In the second situation, the employee's service is less than 25 years. Suppose the employee works for 20 years. Then he retires. So the proportionate factor will be 20/25=0.8. In such a situation, the payout will be calculated like this. 50% X 1,00,000 X 0.8 = 40,000
The third situation is of minimum guaranteed payout. Suppose the basic pay of an employee at the time of retirement is Rs 15,000, then his payout will be Rs 7,500, which will be less than the minimum assured amount. In such a situation, his final payout will be Rs 10,000.