We had the New Pension Scheme (NPS) in operation since 2004. Before that, we had the Old Pension Scheme (OPS). The central government recently announced Unified Pension Scheme (UPS). The Maharashtra government was quick to announce its acceptance of UPS, giving employees a choice between UPS and NPS. It has since announced a third option, Revised Pension Plan (RPS)!
What's the difference? First, about UPS. Most people think that it's very similar to OPS except that employees have to contribute 10 per cent of their salary whereas OPS required no contribution. Former finance secretary Subhash Chandra Garg has highlighted an important difference. (I too had picked it up but I thought I was wrong). If Garg is wrong, please let me know.
The UPS, Garg says, assures 50 per cent of the basic pay of the last 12 months of an employee. This will be indexed to inflation. The OPS assured 50 per cent of basic pay plus DA. So the pension amount is not quite the same. (We do not know whether UPS will be revised with new Pay Commission recommendations as is the case with OPS). However, 50 per cent of basic pay would be an improvement on what most employees have been getting by way of cumulative amount through investment in NPS.
Now, about RPS. The RPS offered by the Maharashtra government is 50 per cent of the last drawn salary (I presume, again it's the last drawn basic pay). Then, it's clearly superior to UPS? Not quite because the UPS also offers a lump sum amount which, I believe, the RPS does not. For those promoted towards the end, RPS may be better. For others, UPS would seem better.
Garg says it's only a matter of time before government employees begin to clamour for OPS. As the ranks of the government employees post 2004 grows, the clamour will become very difficult to resist.
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