UPS vs NPS vs OPS: Which Pension System Offers the Highest Payout for Rs 95,000 Salary & 27 Years of Service?

The Unified Pension Scheme (UPS) will be a new option available to central government employees as of April 1, 2025.

Employees will now have more options when it comes to selecting the appropriate pension plan in addition to the current Old Pension Scheme (OPS) and National Pension System (NPS).

However, which system provides the largest monthly pension for a worker who retires after 27 years of pensionable service and an average basic pay of Rs 95,000? The three systems—OPS, NPS, and the recently installed UPS—will be compared.

The Old Pension Scheme (OPS): What is it?

The conventional pension system that has existed since the post-independence era is known as the Old Pension Scheme (OPS).

It has altered a lot throughout the years, but since the late 20th century, it has mostly stayed the same.

Employees of the national government who began working before January 1, 2004, as well as those in states like Rajasthan, Punjab, Chhattisgarh, and Haryana that have chosen to reinstate it, are still covered by it.

How Does OPS Calculate Pension?

50% of the average of the previous ten months’ basic pay and emoluments is used to calculate pensions under OPS.

For instance, the monthly pension would be Rs 47,500 if the average basic wage upon retirement was Rs 95,000.

In the event of their death, the pensioner is also entitled to a family benefit, which is 60% of their monthly pension.

Workers with less than ten years of service may get a lump sum payment but are not eligible for monthly pensions.

OPS Pension Commutation

In order to receive a lump sum payout at retirement, OPS permits pensioners to commute up to 40% of their pension.

For the first five years, however, this results in a lower pension amount; after that, the pension is restored to its full amount.

The National Pension System (NPS): What is it?

In 2004, OPS was superseded with the more contemporary NPS retirement plan. Both the employer and the employee make contributions to the pension corpus under NPS; the employer may contribute up to 14% of basic pay, while the employee may contribute up to 10%.

Although this plan offers greater flexibility than OPS, there is no certainty of a pension sum. Employees must invest 40% of their corpus in an annuity upon retirement in order to be eligible for a monthly pension.

How does the NPS calculate pensions?

The employee’s NPS account balance, which increases with contributions and market-linked returns, serves as the basis for the NPS pension.

For instance, the cumulative corpus can be significant if an employee makes a monthly contribution of Rs 10,000 to their NPS account for 27 years, with the amount increasing by 5% annually.

NPS pension:

Here is an estimate for a person retiring with an average basic pay of Rs 95,000 and 27 years of pensionable service, assuming a 60% withdrawal from the corpus and the purchase of an annuity from the remaining 40%:

An estimated Rs 2,09,37,863 is the corpus.

Total Estimated: Rs 1,43,77,568

Pension Estimated Monthly: Rs 47,110

The monthly income might reach Rs 1,17,775 if the pensioner chooses to invest the full corpus in an annuity; however, there would not be a lump sum payment in this scenario.

The Unified Pension Scheme (UPS): What is it?

Combining aspects of both OPS and NPS, the Unified Pension Scheme (UPS) is a hybrid concept.

It was first proposed in 2024 and would go into effect on April 1, 2025, giving central government workers the choice to convert to UPS or stay with NPS.

UPS wants to offer both market-linked returns and a guaranteed pension.

How does UPS calculate pensions?

Both the employer and the employee make contributions to the pension fund under UPS; the company contributes 18.5% and the employee contributes 10% of their base pay and dearness allowance (DA).

The employer’s 10% payment goes into an assured income pool, while the employee’s 10% goes into market-linked investments. UPS offers family pensions, just like OPS.

Qualifications for the UPS Pension

To be eligible for a UPS pension, employees must have worked for the company for at least ten years.

The pension might be as much as 50% of the average basic pay and DA for employees who have worked for 25 years or more.

The pension for workers with less than 25 years of employment is based on their years of service.

Pension System Comparison

OPS: Average Basic Pay + 27 Years of Service + Monthly Pension for Rs 95,000
Pension Basic: Rs 47,500

Rs 25,175 is the Dearness Allowance (DA).

Pension total: Rs 72,675

In the event of death, the family pension is Rs 43,605.

Retirement lump sum: Rs 7,84,890

UPS: Average Basic Pay & 27 Years of Service + Monthly Pension for Rs 95,000
Pension Basic: Rs 47,500

Rs 25,175 is the Dearness Allowance (DA).

Pension total: Rs 72,675

In the event of death, the family pension is Rs 43,605.

Retirement lump sum: Rs 7,84,890

NPS: Average Basic Pay + 27 Years of Service + Monthly Pension for Rs 95,000
The size of the NPS pension is determined by contributions and investment performance; it is not guaranteed.

An estimated Rs 2,09,37,863 is the corpus.

Total Estimated: Rs 1,43,77,568

Pension Estimated Monthly: Rs 47,110

If the pensioner uses all of the corpus to buy an annuity:

Pension Estimate: Rs 1,17,775 per month

Conclusion:

For a worker who has 27 years of pensionable service and retires with an average base salary of Rs 95,000:

Similar monthly pensions of Rs 72,675 are provided by OPS and UPS, including with lump sum benefits and family pensions.

If the full corpus is invested in an annuity, NPS can offer a far greater monthly income of Rs 1,17,775 than its lower guaranteed pension of Rs 47,110 (assuming a 60% withdrawal from the corpus).

Therefore, if the retiree chooses to take an annuity from their entire corpus, NPS may be able to pay the largest pension sum, even though OPS and UPS offer steady monthly pensions.

UPS and OPS provide more guaranteed and predictable pensions, while NPS entails greater risk because of market-linked returns.