Pension calculation after 18 years of service: Lump sum amount is higher in NPS, pension is same in UPS

The central government has recently announced the Unified Pension Scheme (UPS) for central government employees. Maharashtra has also announced to implement it for its employees. Other states may also follow this path. In such a situation, there is a debate going on as to which of the already existing New Pension Scheme (NPS) and UPS is more beneficial.

Financial experts say that 60% of the money deposited in the pension fund in NPS is returned in lump sum. The remaining 40% is used to pay pension at the rate of 6.99% every month. In UPS, the government keeps this amount with itself and pays pension. If you make a lump sum FD of 60% of the amount in NPS in a bank, then the annual interest will make the pension of NPS equal to that of UPS.

On the other hand, UPS will provide pension by adding DR (Dearness Allowance) to 50% of the average basic salary of the last 12 months. This amount is 10 times less than NPS. Bhaskar’s research has revealed that although it is true in the current structure that the difference in the lump sum amount is very large. Therefore, if we calculate the retirement benefit in the first 10 years of pension, then NPS looks attractive.

However, the biggest advantage of UPS is that such pensioners will be entitled to the 8th Pay Commission which will come into effect from 1 April 2026. This will increase their pension by two and a half times. This difference is very big. On this basis, employees moving from NPS to UPS will be benefited.

condition of states