What you know that the Central-government employees who opt for the Unified pension Scheme (UPS) will start receiving pension only at the age of superannuation, which is 60 years. this means even if an employee retires before 60, they will not receive pension benefits until they reach 60.
This policy aims to discourage early retirement and encourage employees to remain in the workforce longer, thereby increasing labor-force participation. Unlike UPS, the NPS does not have a fixed superannuation age for drawing pension.
Understand the Unified Pension Scheme (UPS) Structure:
Under the Unified Pension Scheme (UPS), your corpus grows through regular contributions, investment returns, and government support. It consists of two key components:
Individual Corpus – Your accumulated savings in the Permanent Retirement Account Number (PRAN), built through:
- Employee Contributions (10%) of Basic Pay + DA
- Government Contributions (18.5%)
- Investment Returns over time
- Adjustments for Withdrawals (if any)
Benchmark Corpus – A standard corpus determined by the authority to evaluate whether your savings are adequate for post-retirement benefits, assuming:
- Timely Contributions
- Default Investment Pattern
- No Partial Withdrawals
At superannuation, your corpus is used to provide a monthly pension, ensuring financial security. If the Individual Corpus falls short of the Benchmark Corpus, adjustments may be considered to maintain pension stability.
Unified Pension Scheme (UPS) and how it differs from the National Pension System (NPS):
Pension Under UPS:
- Employees opting for UPS, under the provisions of FR 56 (j) will receive their pension only at the age of 60 (superannuation), even if they retire earlier.
- This structure is designed to discourage early retirement and encourage longer workforce participation.
Pension Under NPS:
- In NPS, the superannuation date does not impact pension withdrawals.
- NPS is a market-linked system without a fixed assured pension.
This aligns with the government’s goal of ensuring financial sustainability and preventing premature pension payouts while securing post-retirement financial stability for employees.
Benefits Under UPS (Unified Pension Scheme) or NPS (National Pension System)
Suppose, if you complete 25 years of service in 2030 and have an Individual Corpus of ₹50,00,000, here’s how your benefits compare under the Unified Pension Scheme (UPS) vs. National Pension System (NPS) when opting for Voluntary Retirement (VRS):
Benefits Under UPS (Unified Pension Scheme)
- Since you have completed 25 years of service, you are eligible for UPS pension.
- However, under UPS rules, pension payments will start only at superannuation (60 years), even if you retire earlier.
- Until you turn 60, you won’t receive any pension, but after 60, you will get a guaranteed pension (50% of the average basic pay of the last 12 months).
- You will also get a family pension (60% of the pension) for your dependents, inflation indexation, and a minimum pension guarantee of ₹10,000/month.
- Gratuity will also be provided based on service length.
Benefits Under NPS (National Pension System)
- Under NPS, since your Individual Corpus is ₹50,00,000, you can withdraw 60% (₹30,00,000) tax-free as a lump sum at retirement.
- The remaining 40% (₹20,00,000) must be used to buy an annuity, which will provide a monthly pension (amount depends on annuity rates).
- Unlike UPS, pension payouts can start immediately after VRS, without waiting till 60 years.
- However, NPS pensions are market-linked and can fluctuate, with no minimum guaranteed pension.
Which Is Better?
- UPS is better if you want a stable, assured pension after 60, along with benefits like family pension, inflation protection, and gratuity. However, you must wait until 60 to start receiving your pension.
- NPS is better if you want immediate access to funds after VRS, as it allows partial withdrawal and an earlier pension. However, the pension amount is market-dependent and not guaranteed.
If your Date of Birth fall in June, 1982, and you will complete 25 years of service in 2030, your age at that time will be 48 years. Now, let’s compare your benefits under UPS and NPS if you take Voluntary Retirement (VRS) in 2030 with an Individual Corpus of ₹50,00,000:
Benefits Under Unified Pension Scheme (UPS):
- You will not receive an immediate pension after VRS in 2030.
- Pension payments will start only at superannuation (60 years, i.e., in 2042).
- Your pension will be 50% of your average basic pay of the last 12 months.
- Family Pension: 60% of your pension will be provided to your family after your demise.
- Inflation Protection: Pension will be linked to AICPI-IW (All India Consumer Price Index – Industrial Workers) for cost-of-living adjustments.
- Minimum Pension Guarantee: If eligible, you will get at least ₹10,000/month after 60 years.
- Gratuity: You will receive a lump sum based on your service period and last drawn basic pay.
Benefits Under National Pension System (NPS):
- You can access your corpus immediately after VRS in 2030.
- 60% of your corpus (₹30,00,000) can be withdrawn tax-free.
- 40% (₹20,00,000) must be used for an annuity, which will provide a monthly pension starting immediately.
- Pension amount depends on market returns and the type of annuity plan chosen.
- No guaranteed pension or inflation protection—payouts depend on market performance.
Which is Better for You?
| Criteria | UPS (Unified Pension Scheme) | NPS (National Pension System) |
|---|---|---|
| Pension Start | At 60 years (2042) | Immediately after VRS in 2030 |
| Guaranteed Pension | Yes (50% of avg. basic pay) | No (Market-dependent) |
| Family Pension | Yes (60% of pension) | Depends on annuity type |
| Inflation Protection | Yes (AICPI-IW Linked) | No |
| Early Withdrawal | No | Yes (60% lump sum available) |
| Market Risk | None | High (depends on returns) |
- Choose UPS if you want long-term financial security, a guaranteed pension, and inflation protection but can wait until 60 for pension payouts.
- Choose NPS if you want early access to your corpus, flexibility in withdrawals, and are comfortable with market risks.
Since you will be only 48 years old in 2030, if you take VRS, you must have alternative financial support until 60 if opting for UPS. If you need funds before 60, NPS might be better.
Make More Interesting the Calculation:
If your Basic Pay at the retirement time is 72800 per months:
Since your Basic Pay at Retirement (VRS in 2030) is ₹72,800, let’s calculate your pension benefits under UPS and NPS.
Benefits Under Unified Pension Scheme (UPS):
- You will receive 50% of your average basic pay over the last 12 months before superannuation as a pension.
- Pension Calculation:
50%×72,800=36,400 per month - Family Pension (60% of your pension) = ₹21,840 per month (for dependents after your demise).
- Pension starts only at 60 years (in 2042), so no pension benefits from 2030 to 2042.
- Inflation Adjustment: Pension will be linked to AICPI-IW to maintain purchasing power.
- Minimum Pension: If eligible, you will get at least ₹10,000/month.
- Gratuity: Based on your service tenure.
Benefits Under National Pension System (NPS):
- Your Individual Corpus = ₹50,00,000 in 2030.
- Lump Sum Withdrawal: 60% can be withdrawn immediately (₹30,00,000 tax-free).
- Annuity Purchase: 40% (₹20,00,000) must be used for a pension plan.
- Pension Estimate: If the annuity rate is around 6% per annum, monthly pension =
20,00,000×6%/12 = 10,000 per month - No guaranteed pension or inflation protection—payouts depend on market performance.
Comparison & Conclusion:
| Criteria | UPS (Unified Pension Scheme) | NPS (National Pension System) |
|---|---|---|
| Pension Start | At 60 years (2042) | Immediately after VRS in 2030 |
| Guaranteed Pension | Yes (₹36,400/month) | No, depends on annuity (₹10,000/month) |
| Family Pension | Yes (₹21,840/month) | Depends on annuity type |
| Inflation Protection | Yes (AICPI-IW Linked) | No |
| Early Withdrawal | No | Yes (₹30,00,000 lump sum available) |
| Market Risk | None | High (depends on returns) |
- If you prioritize financial security and a stable pension, UPS is better (but you must wait until 60 for benefits).
- If you need funds immediately and are comfortable with market risks, NPS allows early withdrawals but provides a lower pension.
Since your UPS pension is ₹36,400/month, significantly higher than NPS pension (₹10,000/month), UPS is financially better in the long run if you can manage the gap until 60.
Make More Interesting the Calculation Again:
If you deposit the ₹30,00,000 lump sum in a Bank Fixed Deposit (FD) from 2030 to 2042, your monthly earnings will depend on the interest rate. Let’s assume different FD interest rates (compounded quarterly) and calculate your monthly earnings.
Scenario: ₹30,00,000 FD Investment (2030-2042)
Scenario: ₹30,00,000 FD Investment (2030-2042)
| Interest Rate (Annual) | Monthly Interest (₹) |
|---|---|
| 5% | ₹12,500 |
| 6% | ₹15,000 |
| 7% | ₹17,500 |
| 8% | ₹20,000 |
💡Formula Used:
Monthly Interest= FD Amount × Interest Rate/12
Best Strategy for Maximum Returns:
- Choose a Senior Citizen FD (if you turn 60 before 2042, banks offer +0.5% extra interest).
- Go for Longer Tenure (10-year FDs generally have higher rates).
- Opt for Monthly Interest Payout (so you get a steady income without withdrawing the principal).
- Consider Compounding FD (if you don’t need monthly income, reinvesting the interest will grow your corpus more).
Comparison With UPS Pension (from 2042 onwards)
- From 2030 to 2042, you can earn ₹12,500 to ₹20,000/month from FD interest.
- From 2042 onwards, UPS will provide ₹36,400/month as assured pension.
- You can combine both sources for a steady financial future.
If you choose an FD at 7% interest, you’ll earn ₹17,500/month, which is close to the ₹20,000 NPS pension. But UPS still offers better long-term security!
Compare 12 Years with UPS v/s NPS:
Let’s compare your NPS Pension + FD Interest from 2030 to 2042 with the UPS Pension that starts in 2042.
Assumptions & Data Used:
- Date of Birth: 06.06.1982
- Retirement (VRS) in 2030 (after 25 years of service)
- Basic Pay at Retirement: ₹72,800
- NPS Individual Corpus: ₹50,00,000
- Lump Sum Withdrawal: ₹30,00,000 (to invest in FD)
- FD Interest Rates Considered: 6%, 7%, 8%
- NPS Annuity Investment: 40% of Corpus (₹20,00,000)
- NPS Return on Annuity: 6%
Income from 2030 to 2042 (Before UPS Pension Starts)
| Source | Monthly Income @6% | Monthly Income @7% | Monthly Income @8% |
|---|---|---|---|
| NPS Annuity (₹20L @6%) | ₹10,000 | ₹10,000 | ₹10,000 |
| FD Interest (₹30L) | ₹15,000 | ₹17,500 | ₹20,000 |
| Total Monthly Income | ₹25,000 | ₹27,500 | ₹30,000 |
💡Key Observation: With an 8% FD return, your income can be ₹30,000 per month, which is closer to UPS pension.
Income from 2042 Onwards (After UPS Pension Starts)
- UPS Assured Pension (50% of Avg. Basic Pay):
- ₹72,800 × 50% = ₹36,400/month
- Inflation-Linked Adjustment (likely to increase over time)
- NPS Pension (continues from annuity) + FD (if reinvested instead of spent):
- NPS Annuity @6% = ₹10,000/month
- If FD is Reinvested, additional ₹15,000–₹20,000/month possible.
- Total Potential Income: ₹25,000–₹30,000/month.
Comparison: NPS + FD vs. UPS Pension
| Year | NPS Pension + FD Interest | UPS Pension |
|---|---|---|
| 2030-2042 | ₹25,000 – ₹30,000/month | ❌ – No pension |
| 2042 Onwards | ₹25,000 – ₹30,000/month | ₹36,400/month (indexed to inflation) |
Which is Better?
- UPS Pension is better in the long run due to assured benefits, inflation protection, and no market risk.
- NPS+FD works better for early retirement (2030–2042) but lacks long-term security.
💡Best Strategy: If UPS is an option, opting for it ensures a stable pension, whereas NPS + FD requires financial planning to last longer.
Total Earnings in 12 Years (2030–2042) from NPS:
If you choose the NPS (National Pension System), you will receive a lump sum withdrawal of ₹30,00,000. Over a period of 12 years, you will have access to this amount along with an NPS pension of ₹10,000 per month and an FD (Fixed Deposit) interest of ₹25,000 per month. In contrast, with the UPS (unstated alternative), you would not accumulate any comparable value during the same period.
| Source | Annual Income | 12-Year Total |
|---|---|---|
| NPS Pension (₹10,000 × 12) | ₹1,20,000 | ₹14,40,000 |
| FD Interest (₹25,000 × 12) | ₹3,00,000 | ₹36,00,000 |
| Total Earnings | ₹4,20,000/year | ₹50,40,000 |
Total Earnings over 12 years:
₹30,00,000 (Lump Sum) + ₹14,40,000 (NPS Pension) + ₹36,00,000 (FD Interest) = ₹80,40,000.
This demonstrates that opting for the NPS could provide you with significant financial benefits over the 12-year period compared to the UPS alternative.
Comparison: NPS vs. UPS (2030–2042)
| Scheme | Income in 12 Years | Plus Points |
|---|---|---|
| NPS (Pension + FD Interest) | ₹50,40,000 | ₹30,00,000 in your hand all time |
| UPS (No Pension Till 2042) | ₹0 | Nil |
NPS gives you ₹50+ lakh in 12 years, while UPS gives nothing during this period.
Which is Better?
- NPS is better for early retirement because you get both pension + FD interest.
- UPS is better for long-term stability (after 2042) with an assured pension (₹36,400/month) and inflation protection.
Comparison: NPS + FD vs. UPS Pension After 2042
After 12 years (from 2030–2042), you will have accumulated ₹50,40,000 in earnings through NPS pension and FD interest. Now, let’s compare what happens after 2042 under both systems:
Scenario 1: NPS + FD (Post-2042 Earnings)
After 12 years (2030–2042), your accumulated ₹50,40,000 can be reinvested in an FD at 8% annual interest, providing ₹33,600/month in interest.
Additionally, your NPS pension continues, assuming an annuity of ₹10,000/month.
| Income Source (Post-2042) | Monthly Amount (₹) | Annual Amount (₹) |
|---|---|---|
| NPS Pension | ₹10,000 | ₹1,20,000 |
| FD Interest (on ₹50.4 lakh @ 8%) | ₹33,600 | ₹4,03,200 |
| Total Monthly Income | ₹43,600 | ₹5,23,200 |
Total Annual Income After 2042 = ₹5.23 lakh per year
Scenario 2: UPS Pension (Post-2042 Earnings)
Under UPS, after 2042, you will receive 50% of your last drawn basic pay as pension, which is:
- Basic Pay at Retirement (2030) = ₹72,800
- UPS Pension (50% of ₹72,800) = ₹36,400/month
- Annual UPS Pension = ₹4,36,800
Total UPS Annual Income After 2042 = ₹4.37 lakh per year
Comparison: Which is Better After 2042?
| Scheme | Monthly Income (₹) | Annual Income (₹) |
|---|---|---|
| NPS + FD | ₹43,600 | ₹5,23,200 |
| UPS Pension | ₹36,400 | ₹4,36,800 |
Post-2042, NPS + FD gives ₹87,000 more per year compared to UPS.
- NPS + FD provides higher income even after 2042 (₹43,600/month vs. ₹36,400/month under UPS).
- UPS offers long-term stability with inflation-indexed pension, while NPS + FD relies on interest rates and market conditions.
- If FD interest rates drop, the advantage of NPS+FD over UPS will reduce.
If you want a higher income and flexibility, NPS + FD is better. If you prefer a guaranteed, inflation-linked pension, UPS is the safer choice (but why if look for demise).
NPS + FD vs. UPS: Wealth and Family Security Comparison
One of the biggest advantages of NPS + FD over UPS is that under NPS, you will have ₹50,40,000 accumulated in your bank account during the 12-year gap (2030–2042). This provides financial security, while UPS offers no such accumulated savings—meaning your pocket remains empty during this period.
Now, let’s compare what happens after 2042, both for you and your family in case of demise:
Scenario 1: NPS + FD (Post-2042 Earnings & Family Security)
After 12 years (2030–2042):
- You have ₹50,40,000 in FD, earning ₹33,600/month interest (at 8%)
- You continue receiving ₹10,000/month from the NPS pension
| Income Source (Post-2042) | Monthly Amount (₹) | Annual Amount (₹) |
|---|---|---|
| NPS Pension | ₹10,000 | ₹1,20,000 |
| FD Interest (on ₹50.4 lakh @ 8%) | ₹33,600 | ₹4,03,200 |
| Total Monthly Income | ₹43,600 | ₹5,23,200 |
- Total Earnings: ₹5.23 lakh per year
- If you pass away, your family still has ₹50,40,000 in FD, earning ₹33,600/month in interest + NPS family pension (50-60% of original pension).
Scenario 2: UPS (Post-2042 Earnings & Family Security)
- After 2042, UPS provides 50% of your last drawn basic pay as pension
- UPS Pension = ₹36,400/month (50% of ₹72,800)
- Annual UPS Pension = ₹4,36,800
- Total UPS Income After 2042 = ₹4.37 lakh per year
If you pass away, the family gets only 60% of your UPS pension (₹21,840/month or ₹2,62,080 per year). There is no FD or lump sum amount left behind.
Key Differences in Wealth & Family Security
| Factor | NPS + FD | UPS |
|---|---|---|
| Wealth Accumulated by 2042 | ₹50,40,000 in FD | ₹0 (No savings) |
| Total Monthly Income (After 2042) | ₹43,600 | ₹36,400 |
| Total Annual Income (After 2042) | ₹5,23,200 | ₹4,36,800 |
| Family Benefits (In Case of Demise) | ₹50,40,000 remains in FD + NPS family pension (₹6,000/month) | Family pension at ₹21,840/month (60% of UPS pension) |
| Long-Term Financial Security for Family | Higher, as corpus remains + pension continues | Lower, as pension reduces with no savings |
Final Verdict: Which is Better for Family Security?
As you know, it is define in the Gazette notification, under the Unified Pension Scheme (UPS), the assured pension payout begins from the date the employee would have superannuated if they had continued in service. If an employee takes Voluntary Retirement (VRS) before the age of 60, they may have to wait until their notional retirement date to start receiving pension benefits.
NPS + FD is significantly better for family security because:
- You accumulate ₹50,40,000, which remains with your family even after demise.
- Your family continues earning ₹33,600/month FD interest + NPS family pension.
- UPS provides only a pension, and after demise, the family gets just ₹21,840/month.
Final Conclusion: NPS + FD vs. UPS
Choosing between NPS + FD and UPS depends on your financial priorities and long-term goals. If you opt for NPS + FD, you will accumulate ₹50,40,000 in your bank account over 12 years (2030–2042) through a combination of NPS pension and FD interest + (lump sum of ₹30,00,000 which already in FD). This provides immediate financial security and flexibility. After 2042, you will earn ₹43,600/month (₹10,000 from NPS pension + ₹33,600 from FD interest), and your family will retain the ₹50,40,000 FD corpus along with continued FD interest and a family pension in case of your demise.
On the other hand, UPS offers no wealth accumulation during the 12-year gap but provides a guaranteed pension of ₹36,400/month starting in 2042, along with inflation protection and family pension benefits. However, your family will not have access to any lump sum amount like the FD corpus under NPS + FD.
In summary, NPS + FD is better if you prioritize higher income, wealth accumulation, and family financial security, while UPS is ideal if you prefer a stable, guaranteed pension and can manage without savings during the initial 12-year period. Your choice should align with your financial needs, risk tolerance, and long-term goals.
The calculations presented here are based on estimations and assumptions. For official figures and accurate details regarding the Unified Pension Scheme (UPS), please refer to the Gazette Notification issued by the government on January 24, 2025. If you are under the National Pension System (NPS), you may also check your own contributions and investment details to compare your expected benefits.
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!
