NPS vs UPS Calculations: Age 25 years, basic pay & DA Rs 35,000? Where you can get higher lump sum and pension at retirement

NPS vs UPS Calculations: National Pension Scheme (NPS) is a default retirement pension scheme for central government employees who joined their service after December 31, 2003. However, from April 1, 2025, they got one more option in the form of Unified Pension Scheme (UPS). Not just the employees following NPS can switch to UPS, but pensioners getting their pension under NPS can also make a switch.

Based on their age and salary, employees can calculate their estimated pension and the lump sum amount they can get in NPS and UPS before opting for either of the options.

But what if a 25-year-old central government employee with basic pay and a dearness (DA) allowance of Rs 35,000 wants to estimate their monthly pension and the lump sum withdrawal amount?

Where can they get higher benefits – NPS or UPS? See calculations to know. 

NPS for central government employees

NPS is a retirement scheme for central government employees where the employee and the employer both contribute to the employee’s NPS corpus. 

The employee’s contribution to their NPS account is 12 per cent of their basic pay and DA.

On the other hand, the central government contributes 14 per cent of the employee’s basic pay and DA. 

Central government employees can choose any of the 3 NPS investment schemes.

1. Scheme G – 100 per cent of the contribution will be invested in government bonds and related instruments.
2. Scheme LC 50 – Life cycle fund where the cap to equity investments is 50 per cent of the total asset.
3. Scheme LC 25 – Life cycle fund where the cap to equity investments is 25 per cent of the total asset.

If they don’t choose among these 3 schemes, a default scheme applies where investments are done in default schemes of LIC, UTI and SBI in a predefined proportion.

The maximum exposure to equity for a central government employee can be 50 per cent. 

NPS withdrawal and pension

Central government employees can have only a Tier I account, which allows them to withdraw up to 60 per cent of their corpus as a lump sum amount.

From the remaining 40 per cent, they need to buy an annuity plan, the return from which provides them with a monthly pension. 

UPS for central government employees

In UPS also, both the employee and the central government contribute to the employee’s UPS account. 

The employee contribution to their UPS account is 10 per cent of their basic pay and DA, while the central government’s contribution is also 10 per cent of the employee’s basic pay and DA.

Both are credited to each employee’s individual corpus.

Other than that, the central government provides an additional contribution of an estimated 8.5 per cent of the employee’s basic pay and DA to the pool corpus on an aggregate basis. 

The scheme provides an assured income of at least Rs 10,000 on completion of at least 10 years of service.

While the maximum pension that they can get is 50 per cent of the 12-month average basic pay and DA immediately prior to their superannuation. 

At retirement, the employee will get a lump sum amount other than the monthly payout.

UPS vs NPS: Calculations for story

Here are the conditions- 

Employee age- 25 years
Retirement age- 60
Basic pay and DA- 35,000
Annual basic pay growth- 5 per cent
Annual DA growth- 4 per cent
Expected return from investment- 9 per cent
Lump sum withdrawal at retirement- 60 per cent
Annuity rate- 6.5 per cent
Life expectancy- 80 years
Surviving spouse life expectancy- 80 years

UPS vs NPS: Results

UPS benefits

Monthly payout after superannuation- Rs 1,59,083+ dearness allowance 
Lump sum payout at superannuation- Rs 68,70,009
Final Withdrawal Payout at Superannuation- Rs 5,64,77,355 
Total monthly payouts to subscribers in retirement phase- Rs 6,07,06,149
Aggregate expected benefits to be received by the subscriber- Rs 12,40,53,513

NPS benefits

Monthly payout after superannuation- Rs 2,44,735 
Lump sum payout at superannuation- not applicable
Final Withdrawal Payout at Superannuation- Rs 6,77,72,826
Total monthly payouts to subscribers in retirement phase- Rs  5,87,36,449
Aggregate expected benefits to be received by the subscriber- Rs 12,65,09,275

Conclusion: At this stage, NPS is a clear winner with a higher pension and lump sum withdrawal. However, UPS’ monthly pension will increase with the DA rate and most likely whenever a new pay commission’s recommendations are implemented.

(Disclaimer: This is not investment advice. These are projections. Do your own due diligence or consult an expert for financial planning.)