Following the criticism of the National Pension Scheme, the government on Saturday, August 24, approved the Unified Pension Scheme (UPS), which will come into effect in the next financial year from April 1, 2025.

The new scheme assures a retiree 50 per cent of their salary as pension, based on the average salary they drew in the last 12 months prior to retirement, provided they have a  qualifying service of 25 years. 

Also Read

Let’s take a look at some differences between UPS and NPS.

UPS vs NPS

  • UPS comes with the promise of an assured pension. Those who have opted for NPS will be permitted to switch to UPS following year. Meanwhile, NPS is a market-linked defined contribution scheme. Because the funds in NPS are invested in the market, the pension amount is not fixed and may vary based on market conditions.
  • Under the NPS, the employee contributed 10 per cent of their basic salary, while the government matched it with a 14 per cent contribution. UPS takes the government’s contribution to 18.5%, while the employees will keep on contributing 10 per cent of theri basic pay and DA.
  • Employees contributing to NPS are eligible for tax deductions of up to 10 per cent of their salary (Basic + DA) under Section 80 CCD(1), within the overall limit of ₹1.5 lakh under Section 80 CCE, Mint reported. Additionally, they can claim an extra deduction of up to Rs 50,000 under Section 80 CCD(1B), beyond the Rs 1.5 lakh ceiling under Section 80 CCE. The tax benefits under the UPS are yet to be announced.
  • While UPS is just for government employees who have opted for NPS, private employees could also opt for NPS if their employer had adopted the contribution.  Alternatively, any Indian citizen between the ages of 18 and 70 can voluntarily choose to enroll in the NPS.