Ever since UPS has been introduced, government employees want to get the right information about NPS vs UPS.
Choosing between the National Pension System (NPS) and the Unified Pension Scheme (UPS) for your retirement can feel like a big decision. Both pension schemes offer different benefits and drawbacks, and understanding these is key to making a choice you will be happy with later.
This post will help simplify the comparison between NPS and UPS, using a clear example, so you can decide what’s best for your financial future.
NPS vs UPS: Which Pension Scheme is Better
Our analysis is based on the following assumptions:
- An employee joined in January 2016 as a GST Inspector in Level-07.
- They are projected to retire in January 2052.
- The employee received four promotions/upgradations during their career.
- A 20% increase in pay was factored in for each Central Pay Commission (CPC) revision.
- A consistent rate of return of 8.50% per annum has been assumed for both NPS and UPS investments.
- For NPS annuities, a return rate of 6.25% per annum was assumed for the “without return of purchase” option and between 6.00% to 6.50% for the “with return of purchase” option.
Important Note: This comparison is not to declare one scheme superior to the other. Both NPS and UPS have their own merits and demerits. The goal is to provide information that enables you to choose a scheme with a clear understanding of its pros and cons, preventing future regrets.
For example, if you choose UPS because you want a higher monthly pension—and you already know that NPS may give a bigger lump sum due to 14% government contribution—then you won’t feel bad at retirement if your colleague under NPS gets more money upfront. Similarly, if you pick NPS for a bigger lump sum, knowing that UPS gives a fixed pension that increases over time with Dearness Relief (DR), then you won’t regret it later if someone junior to you under UPS ends up with a higher monthly pension.
Understanding the Benefits of NPS
NPS offers flexibility in how you manage your corpus at retirement. Let’s look at the “without return of purchase” option, where the invested corpus is not returned to the nominee after the death of both the pensioner and spouse. This option generally offers a slightly higher rate of return, typically between 6.50% to 7.25%.
NPS – Case I: 60% Corpus Withdrawn, 40% for Annuity (Without Return of Purchase)
| Description | Amount (₹) |
| Total amount of Corpus (RoR: 8.50% p.a.) | 11,44,12,759 |
| % of Corpus withdrawn | 60% |
| Amount of Corpus withdrawn/Lump sum Payment | 6,86,47,655 |
| % of Corpus invested for Annuity (Pension) | 40% |
| Amount of Corpus invested for Annuity (Pension) | 4,57,65,103 |
| Monthly amount of Pension | 3,17,000 |
| Monthly amount of pension after 5 years | 3,17,000 |
| Monthly amount of pension after 10 years | 3,17,000 |
| Monthly amount of pension after 15 years | 3,17,000 |
| Monthly amount of pension after 20 years | 3,17,000 |
| Monthly amount of pension after 25 years | 3,17,000 |
| Amount refunded to the Nominee after death of both the Pensioner & Spouse | 0 |
NPS – Case II: Higher Annuity (Without Return of Purchase)
| Description | Amount (₹) |
| Total amount of Corpus (RoR: 8.50% p.a.) | 11,44,12,759 |
| % of Corpus withdrawn | 9.050% |
| Amount of Corpus withdrawn/Lump sum Payment | 1,03,54,355 |
| % of Corpus invested for Annuity (Pension) | 90.950% |
| Amount of Corpus invested for Annuity (Pension) | 10,40,58,404 |
| Monthly amount of Pension | 7,21,000 |
| Monthly amount of pension after 5 years | 7,21,000 |
| Monthly amount of pension after 10 years | 7,21,000 |
| Monthly amount of pension after 15 years | 7,21,000 |
| Monthly amount of pension after 20 years | 7,21,000 |
| Monthly amount of pension after 25 years | 7,21,000 |
| Amount refunded to the Nominee after death of both the Pensioner & Spouse | 0 |
There’s also the “with return of purchase” option in NPS, where the invested corpus is returned to the nominee after the death of both the pensioner and spouse. The rate of return in this case is slightly lower, between 6.00% to 6.50%.
NPS – Case III: With Return of Purchase (Lumpsum withdrawal amount equals Lumpsum amount of UPS)
| Description | Amount (₹) |
| RoR on annuity | 6.25% |
| Total amount of Corpus (RoR: 8.50% p.a.) | 11,44,12,759 |
| % of Corpus withdrawn | 9.05% |
| Amount of Corpus withdrawn/Lump sum Payment | 1,03,54,355 |
| % of Corpus invested for Annuity (Pension) | 90.950% |
| Amount of Corpus invested for Annuity (Pension) | 10,40,58,404 |
| Monthly amount of Pension | 6,75,000 |
| Monthly amount of pension after 5 years | 6,75,000 |
| Monthly amount of pension after 10 years | 6,75,000 |
| Monthly amount of pension after 15 years | 6,75,000 |
| Monthly amount of pension after 20 years | 6,75,000 |
| Amount refunded to the Nominee after death of both the Pensioner & Spouse | 10,40,58,404 |
Exploring Unified Pension Scheme (UPS) Benefits
The Unified Pension Scheme (UPS) offers assured payouts, and Dearness Relief (DA) has been increased as per the VII CPC. However, CPC benefits on the pension after 5, 10, 15, or 20 years have not been considered; only the increase in DA has been taken into account.
UPS – Case I: 60% Corpus Withdrawn, 40% for Assured Payout
| Description | Amount (₹) |
| Total amount of Corpus (RoR: 8.50% p.a.) | 9,89,52,648 |
| Average Basic Pay for the last 12 months | 10,75,000 |
| Last Basic Pay DA | 4,40,500 |
| Total Lump sum Amount | 6,84,54,710 |
| Assured Monthly Payout | 2,25,213 |
| DR (DA) (34%) | 76,572 |
| Total monthly Payout | 3,01,785 |
| Monthly amount of pension after 5 years (DR 50%) | 3,37,819 |
| Monthly amount of pension after 10 years (DR 75%) | 3,94,122 |
| Monthly amount of pension after 15 years (DR 100%) | 4,50,425 |
| Monthly amount of pension after 20 years (DR 125%) | 5,06,731 |
| Monthly amount of pension after 25 years (DR 150%) | 5,63,034 |
| Monthly amount of Family pension after 20 years (DR 125%) | 4,27,904 |
| Monthly amount of Family pension after 25 years (DR 150%) | 4,61,686 |
UPS – Case II: 0% Corpus Withdrawn, 100% for Assured Payout
| Description | Amount (₹) |
| Total amount of Corpus (RoR: 8.50% p.a.) | 9,89,52,648 |
| Average Basic Pay for the last 12 months | 10,75,000 |
| Last Basic Pay DA | 4,40,500 |
| Total Lump sum Amount | 0 |
| Assured Monthly Payout | 5,37,500 |
| DR (DA) (34%) | 1,82,750 |
| Total monthly Payout | 7,20,250 |
| Monthly amount of pension after 5 years (DR 50%) | 8,06,250 |
| Monthly amount of pension after 10 years (DR 75%) | 9,40,625 |
| Monthly amount of pension after 15 years (DR 100%) | 10,75,000 |
| Monthly amount of pension after 20 years (DR 125%) | 12,09,375 |
| Monthly amount of pension after 25 years (DR 150%) | 13,43,750 |
| Monthly amount of Family pension after 20 years (DR 125%) | 9,40,625 |
| Monthly amount of Family pension after 25 years (DR 150%) | 10,21,250 |
Estimated Corpus Value
The estimated values of NPS and UPS corpus at the end of each year, based on monthly contributions and an 8.50% annual rate of return, are detailed in the provided data.
Monthly Government & Self Contribution under NPS and UPS & Estimated Value of Corpus
| Description | Month-Year | DA RATE | Basic Pay (₹) | DA (₹) | Basic Pay+DA (₹) | Empl. And Govt. monthly Cont. for NPS (₹) | Empl. And Govt. monthly Cont. for UPS (₹) | Value of UPS Corpus at the end of the year RoR: 8.50% p.a. (₹) | Value of NPS Corpus at the end of the year RoR: 8.50% p.a. (₹) |
| Joined as GST Inspector | 01-16 | 0% | 44,900 | 0 | 44,900 | 8,980 | 8,980 | 56,100 | 56,100 |
| 01-17 | 2% | 44,900 | 1,848 | 46,748 | 9,160 | 9,160 | 1,13,179 | 1,13,179 | |
| 07-17 | 5% | 46,100 | 2,310 | 48,410 | 9,610 | 9,610 | 2,43,675 | 2,43,675 | |
| 02-18 | 7% | 46,200 | 3,234 | 49,434 | 9,702 | 9,702 | 3,93,515 | 3,93,515 | |
| 07-18 | 12% | 47,600 | 5,712 | 53,312 | 10,377 | 10,377 | 5,96,327 | 5,96,327 | |
| 07-19 | 17% | 49,000 | 8,330 | 57,330 | 13,759 | 13,759 | 8,25,990 | 8,25,990 | |
| 07-20 | 17% | 49,000 | 8,330 | 57,330 | 14,180 | 14,180 | 10,92,111 | 10,92,111 | |
| 07-22 | 31% | 52,000 | 16,120 | 68,120 | 16,349 | 16,349 | 14,06,959 | 14,06,959 | |
| 07-23 | 46% | 55,200 | 25,392 | 80,592 | 19,342 | 19,342 | 17,69,380 | 17,69,380 | |
| 07-24 | 53% | 56,900 | 30,157 | 87,057 | 20,894 | 20,894 | 21,83,947 | 21,83,947 | |
| 8th Pay Commission | 01-26 | 0% | 1,14,500 | 0 | 1,14,500 | 27,480 | 22,900 | 26,55,906 | 26,09,419 |
| Promoted to Superintendent | 07-26 | 2% | 1,23,700 | 2,474 | 1,26,174 | 30,282 | 25,235 | 31,40,398 | 32,51,060 |
| 07-27 | 5% | 1,27,400 | 6,370 | 1,33,770 | 32,105 | 26,754 | 37,45,445 | 39,31,381 | |
| 07-28 | 9% | 1,31,200 | 11,500 | 1,42,700 | 34,322 | 28,602 | 46,97,154 | 44,25,071 | |
| Granted NFU | 07-29 | 17% | 1,35,100 | 22,967 | 1,58,067 | 37,936 | 31,613 | 55,69,078 | 51,96,822 |
| 07-30 | 24% | 1,45,900 | 35,016 | 1,80,916 | 43,420 | 36,183 | 65,77,034 | 60,85,925 | |
| 07-31 | 31% | 1,50,300 | 46,593 | 1,96,893 | 47,254 | 39,379 | 71,02,605 | 77,32,872 | |
| 07-33 | 38% | 1,54,500 | 58,824 | 2,13,324 | 51,270 | 42,725 | 90,37,867 | 82,48,309 | |
| 07-33 | 46% | 1,59,400 | 73,324 | 2,32,724 | 55,854 | 46,545 | 95,42,897 | 1,05,14,386 | |
| 07-34 | 53% | 1,64,200 | 87,026 | 2,51,226 | 60,294 | 50,245 | 1,21,77,999 | 1,09,97,395 | |
| 07-35 | 58% | 1,69,100 | 98,078 | 2,67,178 | 64,123 | 53,436 | 1,26,20,465 | 1,40,35,623 | |
| 9th Pay Commission | 01-36 | 0% | 3,21,000 | 0 | 3,21,000 | 77,040 | 64,200 | 1,45,57,872 | 1,62,62,492 |
| 07-37 | 5% | 3,41,000 | 17,050 | 3,58,050 | 85,932 | 71,610 | 1,67,21,023 | 1,87,51,590 | |
| 07-38 | 9% | 3,51,000 | 31,590 | 3,82,590 | 91,822 | 76,518 | 1,91,31,744 | 2,15,28,341 | |
| 07-39 | 17% | 3,62,000 | 61,540 | 4,23,540 | 1,01,650 | 84,708 | 2,46,54,154 | 2,18,41,903 | |
| Granted 3rd MACP | 07-40 | 24% | 3,91,000 | 93,840 | 4,84,840 | 1,16,362 | 96,968 | 2,82,15,290 | 2,49,24,139 |
| Promoted to Asst. Commissioner | 07-41 | 31% | 4,03,000 | 1,24,930 | 5,27,930 | 1,26,703 | 1,05,586 | 2,84,10,530 | 3,22,49,254 |
| 07-42 | 38% | 4,15,000 | 1,57,700 | 5,72,700 | 1,37,448 | 1,14,540 | 3,23,10,294 | 3,67,66,033 | |
| 07-43 | 46% | 4,27,000 | 1,96,420 | 6,23,420 | 1,49,621 | 1,24,684 | 4,18,31,798 | 3,66,79,550 | |
| 07-44 | 53% | 4,40,000 | 2,33,200 | 6,73,200 | 1,61,568 | 1,34,640 | 4,15,61,017 | 4,74,96,543 | |
| 07-45 | 58% | 4,53,000 | 2,62,740 | 7,15,740 | 1,71,778 | 1,43,148 | 5,37,87,846 | 4,69,78,833 | |
| 10th Pay Commission | 01-46 | 0% | 8,59,000 | 0 | 8,59,000 | 2,06,160 | 1,71,800 | 5,33,29,710 | 6,11,80,253 |
| 07-47 | 5% | 9,12,000 | 45,600 | 9,57,600 | 2,29,824 | 1,91,520 | 6,03,87,074 | 6,94,00,234 | |
| 07-48 | 9% | 9,35,000 | 84,310 | 10,19,310 | 2,44,702 | 2,03,918 | 6,82,19,675 | 7,85,28,503 | |
| Promoted to Deputy Commissioner | 07-49 | 12% | 9,39,000 | 1,12,680 | 10,51,680 | 2,52,403 | 2,10,336 | 8,88,23,082 | 7,70,42,485 |
| 07-50 | 24% | 10,44,000 | 2,50,560 | 12,94,560 | 3,10,694 | 2,58,912 | 8,69,98,848 | 10,04,47,868 | |
| 07-51 | 31% | 10,75,000 | 3,33,250 | 14,08,250 | 3,37,980 | 2,81,650 | 11,34,36,391 | 9,81,13,626 | |
| Retired on January 2052 | 07-52 | 34% | 10,75,000 | 3,65,500 | 14,40,500 | 3,45,720 | 2,88,100 | 9,89,52,648 | 11,44,12,759 |
Upon retirement in January 2052, the estimated Corpus under NPS vs UPS
| Scheme | Estimated Corpus at Retirement (2052) |
|---|---|
| NPS | ₹11,44,12,759 |
| UPS | ₹9,89,52,648 |
Family Pension & Nominee Benefits
| Scenario | NPS | UPS |
|---|---|---|
| Corpus Return to Nominee | ✅ (With Return) | ❌ |
| Family Pension (after 25 yrs with DR@150%) | ₹4,61,686 | ₹10,21,250 |
Summary Table
| Feature | NPS | UPS |
|---|---|---|
| Higher Retirement Corpus | ✅ | ❌ |
| Growing Monthly Pension | ❌ | ✅ |
| DA/DR Applicability | ❌ | ✅ |
| Nominee Benefit (Corpus Refund) | ✅ (With Return) | ❌ |
| Predictability | Moderate | High |
| Market Risk | ✅ | ❌ |
| Flexibility | ✅ | ❌ |
Which One Should You Choose?
Your decision should depend on your financial goals and risk appetite:
| If you want… | Choose |
|---|---|
| Higher lumpsum at retirement | NPS |
| Stable and inflation-adjusted pension | UPS |
| Corpus refund to nominee | NPS (with return of purchase) |
| Predictable retirement income | UPS |
| Willingness to take market risk for higher return | NPS |
Disclaimer
This analysis is based on projected values, assumptions, and constant returns. Actual benefits under NPS or UPS may vary depending on policy changes, market conditions, and inflation. Always consult a financial advisor or your department before making a final decision.
Final Thoughts
This information shows how NPS and UPS are different. They offer different amounts of money upfront (lump sum), different guaranteed payments (assured payouts), and how Dearness Relief affects your retirement income. Think about these points carefully, along with your own money goals and how much risk you’re comfortable with. This will help you make a smart choice you won’t regret later.
There isn’t one best option. Both NPS and UPS have good and bad points. What’s important is choosing based on what you expect and what makes you feel financially secure for the long term. This way, you won’t regret your decision later.
