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Should I switch from National Pension Scheme to the Unified Pension Scheme?

With the introduction of the Unified Pension Scheme from 1st April 2025, many NPS government subscribers would ask,  Should I switch from National Pension Scheme to the Unified Pension Scheme? Here is a free calculator to find out!

At the time of writing, the full terms and conditions of the Unified Pension Scheme (UPS) are still unclear. So, the suggestions made in this article may change. This is what we know so far.

  • Assured pension: 50% of the average basic pay drawn over the last 12 months before superannuation for a minimum qualifying service of 25 years. This pay is to be proportionate for a lesser service period up to a minimum of 10 years of service.
  • Assured family pension: @60% of employee pension immediately before her/his demise.
  • Assured minimum pension: @10,000 per month on superannuation after a minimum of ten years of service.
  • Inflation indexation: on assured pension, on assured family pension and assured minimum pension
  • Dearness Relief is based on the All India Consumer Price Index for Industrial Workers (AICPI-IW) for service employees. The last 10-year average annual increase is about 5%
  • lump sum payment at superannuation in addition to gratuity 1/10th of monthly emoluments (pay + DA) as on the date of superannuation for every completed six months of service without reduction in the quantum of assured pension
  • Government NPS subscribers can switch to the UPS. They must transfer most of their NPS corpus to the UPS scheme.
  • For UPS subscribers, the monthly employee contribution will be at 10% of basic+ DA, and the government contribution will be 18.5% (variable according to actuarial considerations).
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I quickly ran the numbers for a few cases.  If the entire NPS corpus is used to purchase the same UPS annuity, the annuity rate (pre-tax) is 7% to 9.8% (depending on salary and service). I have not factored in the inflation-indexed component. That will make the effective annuity rate even higher! Such an annuity product (with inflation indexation close to 5%) does not exist in the market (i.e. with life insurers). Also, see: Is the Unified Pension Scheme sustainable?

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