Unified Pension Scheme vs NPS: Full Comparison with Charts

In a landmark regulatory shift, the Government of India has notified the Pension Fund Regulatory and Development Authority (Unified Pension Scheme) Regulations, 2025, ushering in a new pension framework that promises assured payouts, simplified corpus management, and enhanced fiscal predictability for retiring Central Government employees. But how does the Unified Pension Scheme (UPS) truly compare with the existing National Pension System (NPS)? Is it a step closer to the erstwhile Old Pension Scheme (OPS), or just a rebranded compromise?

This detailed explainer decodes the UPS framework, covering:

• Who is eligible and who’s not

• Definitions of key financial concepts such as Assured Payout, Benchmark Corpus, Lump Sum Payment

• Calculation models across different service spans

• Comparative advantages and disadvantages of UPS vs NPS

• Real-money projections over 10 to 20 years, with inflation factored in

Key Concepts Under the Unified Pension Scheme (UPS)

To understand the mechanics of the Unified Pension Scheme, it is vital to grasp the financial terminology and structural pillars that define its working. Unlike NPS, which is a market-linked, non-assured scheme, UPS relies on a hybrid model combining guaranteed payouts with defined government support. The following terms form the foundation of the scheme:

1. Individual Corpus

This is the total amount accumulated in an employee’s Permanent Retirement Account Number (PRAN) under the UPS framework. It includes both employee and government contributions, along with the returns generated on investments during the employee’s service period.

2. Benchmark Corpus

The Benchmark Corpus is a reference value determined by the Pension Fund Regulatory and Development Authority (PFRDA) to evaluate the adequacy of an individual’s savings. It assumes:

• Regular and timely contributions from both employee and employer

• Default investment pattern (without self-directed fund selection)

• No partial withdrawals during the accumulation phase

This figure is used to proportionately scale the final pension payout under the assured model.

3. Assured Payout

This is the monthly pension guaranteed to the subscriber upon retirement. The amount is payable for life, and continues—at 60% of the original rate—to the legally wedded spouse upon the subscriber’s demise. The payout is linked to the formula:

Assured Payout (A) = (½ × P) × (Q ÷ 300) × (IC ÷ BC)
Where:
P = Average of last 12 months’ Basic Pay
Q = Months of qualifying service (max 300)
IC = Individual Corpus
BC = Benchmark Corpus

If the computed payout falls below ₹10,000, the minimum guaranteed pension of ₹10,000/month (plus DA) becomes applicable.

4. Pool Corpus

A distinct fund created by the Central Government to support assured payouts, especially in cases where the individual corpus falls short of the benchmark. It comprises:

• Additional government contributions (approx. 8.5% of basic + DA)

• Transfer of accumulated individual corpus at the time of retirement

This is a stabilisation buffer to ensure that the government can uphold its guaranteed pension promises.

5. Lump Sum Payment

In addition to the monthly pension, a retiring employee under UPS is entitled to a one-time lump sum amount calculated as:

Lump Sum = (1/10) × Total Emoluments × L
Where:
Emoluments = Last drawn Basic Pay + Dearness Allowance
L = Number of completed six-month blocks of qualifying service

For instance, for an employee with 25 years of service (i.e., 50 six-month periods) and emoluments of ₹68,850, the lump sum would amount to ₹3,44,250.

6. Lump Sum Withdrawal

A UPS subscriber may optionally withdraw up to 60% of their individual corpus on retirement. The remaining portion is transferred to the pool corpus to support the assured payout. However, such withdrawals can impact the IC/BC ratio, possibly lowering the monthly pension.

Eligibility Criteria under UPS

The Unified Pension Scheme outlines specific conditions to be eligible for assured pension benefits. These include:

✅ Who Can Opt for UPS?

1. All existing Central Government employees as on 31st March 2025

2. New recruits joining Central Government services on or after 1st April 2025

3. Central Government employees, pensioners, and family pensioners who were under NPS but have since retired or taken VRS

✅ Minimum Service Requirements