• UGI USER
  • Aug 26, 2024
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INDIA APPROVES UNIFIED PENSION SCHEME BALANCING OPS AND NPS

Why in the news?

The Union Cabinet, has agreed to start a new pension plan called the Unified Pension Scheme (UPS). This new plan will mix the good parts of the old pension plan (OPS) and the National Pension Scheme (NPS) and will begin on April 1, 2025.

source:economictimes

Combined Pension Plan:

  • Mixed System: This plan mixes the fixed pension from the Old Pension Scheme with the savings aspect of the New Pension Scheme.
  • It ensures a pension equal to 50% of the salary received just before retiring.
  • Savings: Workers save 10% of their pay, and the government adds 18.5%.
  • Extra Advantages: This plan adjusts for inflation with increases in the cost of living allowance, provides a family pension, and offers a lump sum payment when someone retires.

Handling Issues with NPS

  • NPS Problems: NPS was not favored because it did not promise fixed returns and did not account for inflation. It relied on market performance, which often resulted in smaller pensions than those from OPS.
  • Fix with UPS: UPS tries to solve these problems by offering a fixed pension, which helps to ease worries about not having enough money for retirement if the market does poorly.
Introduction to the Unified Pension Scheme (UPS):

  • Goal: The Central Government created this scheme to ensure pension security for government workers.
  • Structure: It mixes elements from the previous pension plan (OPS) and the newer pension plan (NPS).
  • Start Date: It will be in effect starting April 1, 2025.

Main Points of the UPS:

  • Guaranteed Pension: You’ll get a pension that’s 50% of your average basic salary from the last year before you retire.
  • Government’s Share: The government will contribute 18.5% of your basic salary, up from 14%.
  • Your Share: You’ll still need to contribute 10% of your basic salary.
  • Extra Benefits: This includes a pension for your family and a minimum pension even if you’ve worked for a shorter time.

Associated Article:

https://universalinstitutions.com/16262-2/