Switch to UPS or stay with NPS? Govt employees must decide by June 30 — this calculator can help

The Pension Fund Regulatory and Development Authority (PFRDA) has recently rolled out a new tool called the Unified Pension Scheme (UPS) Calculator. This tool is aimed at assisting central government employees in estimating their pension benefits under both the National Pension System (NPS) and the UPS. The user-friendly UPS Calculator is designed to empower individuals in making informed decisions when selecting their pension plan.

Beginning from April 1, 2025, the Unified Pension Scheme will be applicable to all new central government employees. This scheme is intended to provide a more stable and predictable pension payout compared to the market-linked NPS. Existing NPS subscribers also have the option to switch to the UPS if they so desire. 

Rajani Tandale, Senior Vice President, Mutual Fund at 1 Finance, said: "The UPS calculator is an online tool designed to help users compare the projected retirement benefits from the existing National Pension System (NPS) and the recently introduced UPS, enabling more informed and confident financial choices for the future. If you're a central government employee navigating the crossroads of pension choices, this tool is a valuable resource to guide your next step."

Key features of UPS calculator:

> Detailed Benefit Comparison: Users can input key salary and service data - such as basic pay, dearness allowance (DA), tenure of service, and expected salary increments - to generate comparative projections for monthly pensions, lump sum payouts, and total retirement corpus under both schemes.

> Simple and Accessible Design: The intuitive interface makes it easy for employees to navigate complex pension calculations without financial expertise.

> Better Financial Planning: With clear side-by-side visuals of potential outcomes, the calculator helps users align their pension strategy with long-term financial goals.

Who is eligible? 

Open to all citizens only for central govt. employees with 25+ years of service

Government employees currently enrolled in NPS must decide by June 30, 2025, whether to switch to UPS. If no selection is made by this date, they will automatically remain under the NPS scheme.

Key inputs

To understand how the Unified Pension System (UPS) calculator works, central government employees must first be familiar with a few key inputs:

> Retirement age: Enter your planned age of retirement (superannuation age) to define the duration of your contribution period.

> Monthly Basic Pay: Provide your current basic pay, which forms the basis for calculating contribution levels.

> Existing NPS Tier 1 corpus: If you're already enrolled in the National Pension System (NPS), input your current Tier 1 corpus to include your accumulated savings.

> Monthly contribution: Mention how much you intend to contribute each month toward your pension until retirement.

Once these details are entered, the calculator provides three key projections:

> Projected retirement corpus: The estimated total savings accumulated by the time you retire.

> Monthly pension: An approximate pension amount, calculated using annuity assumptions under UPS or NPS rules.

> Lump sum amount: The portion of the corpus that can be withdrawn at retirement, which may differ depending on the pension scheme chosen.

How to use the UPS calculator

1. Go to the Official Site: The calculator is available through the NPS Trust’s website.

2. Enter Your Data: Provide details like date of birth, joining date, retirement age, pay scale, current NPS balance, expected growth rates, and life expectancy.

3. View the Results: Instantly see a detailed comparison of pension outcomes under both schemes, helping you make a data-backed decision.

Points to Consider

· Market Exposure vs. Safety: NPS may appeal to those who are comfortable with investment risks in exchange for higher potential returns.

· Guaranteed Income Preference: UPS is more suitable for those prioritizing predictable post-retirement income.

· Eligibility Criteria: Only those with 25 or more years of government service qualify for UPS, making long-term tenure an important factor.

If you're a central government employee navigatin