Here, we compare the financial outcomes of the Unified Pension Scheme (UPS) and the National Pension System (NPS) for two employees, A and B, who share the same date of birth and retire after 25 years of service. Employee A opts for UPS, while Employee B chooses NPS. This analysis examines their respective benefits, financial security, and potential gains or losses up to the age of 60 and beyond.
Choosing Between UPS and NPS: Which Retirement Plan Ensures a Secure Future?
Comparison between A and B:
Employees A and B, both born on December 25, 1982, joined service on March 25, 2005, and are set to retire on December 31, 2042.
| Details | A (Opted UPS) | B (Opted NPS) |
|---|---|---|
| Date of Birth (DOB) | 25-12-1982 | 25-12-1982 |
| Date of Joining (DOJ) | 25-03-2005 | 25-03-2005 |
| Retirement Date (Superannuation) | 31-12-2042 | 31-12-2042 |
| Basic Pay (2025) | ₹58,500 |
Salary & Growth (As of 2030)
By 2030, their basic pay reaches ₹67,900, with Dearness Allowance (DA) at 83% (₹56,357), making their total salary ₹1,24,257. This serves as the baseline for comparing their financial outcomes under UPS and NPS.
| Details | A (UPS) | B (NPS) |
|---|---|---|
| Basic Pay | ₹67,900 | ₹67,900 |
| DA @ 53% | ₹56,357 | ₹56,357 |
| Total Salary | ₹1,24,257 | ₹1,24,257 |
Salary & Growth 2025 to 2030
The salary progression over the years reflects annual increments in basic pay and rising Dearness Allowance (DA). Starting at ₹58,500 in 2025, the basic pay gradually increases, reaching ₹67,900 by 2030. Simultaneously, DA grows from 53% (₹31,005) in 2025 to 83% (₹56,357) in 2030, leading to a total gross salary rise from ₹89,505 to ₹1,24,257 over this period.
| Year | Increments | DA% | DA | Gross |
|---|---|---|---|---|
| 2025 | ₹58,500 | 53 | ₹31,005 | ₹89,505 |
| 2026 | ₹60,300 | 59 | ₹35,577 | ₹95,877 |
| 2027 | ₹62,100 | 65 | ₹40,365 | ₹1,02,465 |
| 2028 | ₹64,000 | 71 | ₹45,440 | ₹1,09,440 |
| 2029 | ₹65,900 | 77 | ₹50,743 | ₹1,16,643 |
| 2030 | ₹67,900 | 83 | ₹56,357 | ₹1,24,257 |
NPS Corpus Growth (Employee B – NPS)
The NPS corpus grows steadily over the years due to employee and government contributions (10% + 14%) and an 8% annual return. Starting at ₹28,00,000 in March 2025, it increases each year with additional contributions and interest. By March 2030, the corpus reaches ₹58,33,194, demonstrating the long-term compounding benefits of NPS.
| Periods | NPS Corpus | Return @8% | NPS @10%+14% |
|---|---|---|---|
| March-2025 | ₹28,00,000 | ₹2,24,000 | ₹2,57,774 |
| March-2026 | ₹32,81,774 | ₹2,62,542 | ₹2,76,126 |
| March-2027 | ₹38,20,442 | ₹3,05,635 | ₹2,95,099 |
| March-2028 | ₹44,21,177 | ₹3,53,694 | ₹3,15,187 |
| March-2029 | ₹50,90,058 | ₹4,07,205 | ₹3,35,932 |
| March-2030 | ₹58,33,194 | —- | —- |
Voluntary Retirement Scenario (VRS in 2030)
If Employees A and B opt for Voluntary Retirement (VRS) in March 2030, they would have completed 25 years of service, with 13 years remaining until the age of 60.
- Their basic pay at the time of VRS would be ₹67,900, with Dearness Allowance (DA) at 83% (₹56,357), resulting in a total salary of ₹1,24,257.
- This scenario sets the stage for analyzing their financial benefits under UPS and NPS post-VRS.
| Details | A (UPS) | B (NPS) |
|---|---|---|
| Date of Retirement (DOR) | 31-3-2030 | 31-3-2030 |
| Year of Service | 25Years | 25Years |
| Remaining to 60 | 13Years | 13Years |
| Basic Pay | ₹67,900 | ₹67,900 |
| DA @53% | ₹56,357 | ₹56,357 |
| Total | ₹1,24,257 | ₹1,24,257 |
NPS Contributions Per Month (Employee B – NPS)
Under the NPS scheme, Employee B contributes 10% of their salary (₹8,951), while the government contributes 14% (₹12,531), resulting in a total monthly contribution of ₹21,481 as of March 2025. This contribution is expected to continue until 2030, as outlined in the table above, “NPS Corpus Growth (Employee B – NPS).“
| Details | A (UPS) | B (NPS) |
|---|---|---|
| Employee Contribution @10% | ₹8,951 | ₹8,951 |
| Govt. Contribution @14% | ₹12,531 | ₹12,531 |
| Total Contribution | ₹21,481 | ₹21,481 |
| Upon retirement, Employee B receives a lump sum of ₹34,99,917, generating an FD interest of ₹20,416 per month. Additionally, the NPS pension is ₹12,639 per month, resulting in total monthly benefits of ₹33,055. | ||
| Lump Sum on Retirement | —- | ₹34,99,917 |
| FD Interest on Lum Sum | —- | ₹20,416 |
| Pension Per Month | —- | ₹12,639 |
| Total Benifits per month | —- | ₹33,055 |
Pension Comparison: UPS vs. NPS (2031–2042)
From 2031 to 2042, Employee B (NPS) receives an annual pension of ₹3,96,660, accumulating a total of ₹47,59,920 by December 2042. In contrast, Employee A (UPS) does not receive any pension during this period.
| Years | A (UPS Pension) | B (NPS Pension + Interest) |
|---|---|---|
| 2031 | —- | ₹3,96,660 |
| 2032 | —- | ₹3,96,660 |
| 2033 | —- | ₹3,96,660 |
| 2034 | —- | ₹3,96,660 |
| 2035 | —- | ₹3,96,660 |
| 2036 | —- | ₹3,96,660 |
| 2037 | —- | ₹3,96,660 |
| 2038 | —- | ₹3,96,660 |
| 2039 | —- | ₹3,96,660 |
| 2040 | —- | ₹3,96,660 |
| 2041 | —- | ₹3,96,660 |
| 2042 | —- | ₹3,96,660 |
| Total Pension Received by December 2042 | Nil | ₹47,59,920 |
| Pension January 2043 | ₹33,950 | ₹33,055 |
Starting January 2043, Employee A (UPS) begins receiving a pension of ₹33,950 per month, while Employee B (NPS) continues with ₹33,055 per month (pension + interest earnings). This highlights the key difference in pension structures between UPS and NPS.
Financial Benefits at Retirement (Age 60 in 2042)
Under UPS (Employee A)
| Criteria | Employee A (UPS) |
|---|---|
| Benefit Type | Amount (₹) |
| Lump Sum on Superannuation | ₹3,39,500 |
| Total Pension up to 2042 | ₹0 |
| Grand Total Value NPS | ₹3,39,500 |
Under NPS (Employee B)
| Criteria | Employee B (NPS) |
|---|---|
| Benefit Type | Amount (₹) |
| Lump Sum on Retirement | ₹34,99,917 |
| Total Pension (2030-2042) | ₹47,59,920 |
| Grand Total Value (NPS) | ₹82,59,837 |
NPS Corpus Growth with 7% Interest Post Retirement (Employee B)
After retirement in 2030, Employee B’s NPS corpus continues to grow with an annual interest rate of 7%. The corpus increases each year as follows:
| Year | Corpus | Interest Earned @7% |
|---|---|---|
| 2031 | 34,99,917 | 244992 |
| 2032 | 37,44,909 | 262144 |
| 2033 | 40,07,053 | 280494 |
| 2034 | 42,87,547 | 300128 |
| 2035 | 45,87,675 | 321137 |
| 2036 | 49,08,812 | 343617 |
| 2037 | 52,52,429 | 367670 |
| 2038 | 56,20,099 | 393407 |
| 2039 | 60,13,506 | 420945 |
| 2040 | 64,34,451 | 450412 |
| 2041 | 68,84,863 | 481940 |
| 2042 | ₹73,66,803 | —- |
| Pension (NPS) | ₹18,20,016 (12,639×12×12) | —- |
| Gross | ₹91,86,819 | —- |
| ₹66,229 | —- |
Total Benefits (2042 Onwards)
- Total Pension Received (Post-Retirement): ₹18,20,016
- Gross Corpus Growth: ₹91,86,819
- Monthly Benefits (Pension + Interest): ₹66,229
This estimate highlights how the NPS ensures continued financial support even after retirement, allowing Employee B to receive a steady monthly income immediately upon retirement.
In contrast, Employee A will only receive a lump sum of ₹3,39,500 upon retirement, though it remains unclear whether this amount will be received at voluntary retirement (VRS) in 2030 or at superannuation in 2042.
The waiting period before receiving the first pension will be longer due to the gap between VRS and superannuation. This delay depends on the individual’s health and longevity—if the retiree does not survive, a family pension may begin instead. Unfortunately, these circumstances are beyond anyone’s control.
Final Comparison: Which Option is More Beneficial?
Employee B (NPS) enjoys a significantly higher accumulation in both lump sum retirement and total pension, leading to total wealth of ₹82,59,837, compared to Employee A (UPS), whose total wealth accumulates to ₹3,39,500. Thus, NPS proves to be more beneficial for long-term financial growth.
| Criteria | Employee A (UPS) | Employee B (NPS) |
|---|---|---|
| Lump Sum on Retirement | ₹3,39,500 | ₹34,99,917 |
| Total Pension (Till 2042) | ₹0 | ₹47,59,920 |
| Total Wealth Accumulated | ₹3,39,500 | ₹82,59,837 |
Conclusion: NPS vs. UPS – Which is More Beneficial?
- NPS (Employee B) clearly provides superior financial security, with a substantial corpus and monthly pension payouts.
- UPS (Employee A) offers assured pension benefits but lacks the high returns and flexibility of NPS.
- For long-term financial growth, Employee B (NPS) is in a much stronger position with ₹91.86 lakh in accumulated benefits compared to ₹3.39 lakh under UPS.
These calculations are based on estimates and assumptions. For official and accurate details regarding the Unified Pension Scheme (UPS), please refer to the Gazette Notification issued on January 24, 2025, or follow any subsequent instructions if additional notifications are issued.
If you are enrolled in the National Pension System (NPS), you can review your own contributions and investment details to gain a clearer understanding of your expected benefits and make an informed comparison.
If you have any questions, need assistance, or encounter challenges, feel free to share your concerns in the comments. The CountLen team is dedicated to providing quick and effective solutions. If you notice any inaccuracies or misleading information, please provide feedback—we’re here to support you!
