Big Bucks Now or Steady Paychecks for Life: What’s the Smarter Pension Pick—₹2.25 Cr or ₹84K monthly?
In UPS, the government contributes 10% of your basic pay and dearness allowance and contributes a further 8.5% to your pension fund. Alternatively, the government contributes 14% of your pay under NPS.
Big Bucks Now or Steady Paychecks for Life: What’s the Smarter Pension Pick—₹2.25 Cr or ₹84K monthly?
Central government workers have a significant choice to make—and the clock is ticking. There will be two pensions that they will be able to choose from- the (NPS) National Pension System and the Unified Pension Scheme (UPS), from June 2025.It should be noted that after signing for a job with the UPS, one cannot look back, since the change is irreversible.
So, which plan should one choose? Abhishek Kumar, SEBI-registered investment adviser, posed the big question that many of the central government staff is now pondering.
He posted on LinkedIn, "Central government employees need to make this choice by June 2025 because they have to opt for the National Pension System (NPS) or Unified Pension Scheme (UPS) until then."
Additionally, he posed the question as to what you would choose—guaranteed monthly pension or huge retirement corpus with market-linked returns. Which would you choose?" he posted.
Under UPS, employee shall contribute 10% of basic pay and dearness allowance, against which charitable contributions should be matched by an equal amount. It also contributes another 8.5% to your pension fund. "In the UPS, you are provided with a guaranteed pension of Rs 84,658/month (50% of last pay), DA indexed for life, and a lumpsum amount of Rs 8.45 lakh, provided you retire at age 60," he said.
On the other hand, with National Pension System, the government contributes 14% of your income. But rather than a guaranteed pension, the returns from NPS are based on market-linked annuity plans. Your returns, therefore, can increase or decrease based on market conditions.
Investing in the National Pension System (NPS) for a 25-year term may yield returns of RS 2.25 crores. This 60% of it can be monetized to withdraw Rs 33,750 per month, with an annual addition of 3% in cash drawdown."Ideally, with the remaining 40% balance in hand, it is wiser to go with the 7% joint-life annuity and yield Rs 52,500/month," Kumar elucidated.
