Why I will not opt for the unified pension scheme

The unified pension scheme regulations were released as a gazette notification on March 19th 2025.  The scheme rules were earlier announced: Jan 2025 Gazette Notification.

This is our coverage of the Unified Pension Scheme.

• Revised UPS vs NPS Calculator after Jan 2025 Gazette Notification
• Unified Pension Scheme Formula Explained
• How does the Unified Pension Scheme work? Should you opt for it?
• Using Withdrawal Rates to compare Unified Pension Scheme and National Pension Scheme
• A thumb rule to decide between Unified Pension Scheme and National Pension Scheme

Since these announcements, several readers have asked me if I would opt for UPS. In this article, I explain why I prefer the NPS (National Pension Scheme) to the UPS. I have already discussed this earlier: Why I prefer the National Pension Scheme to the Unified Pension Scheme. In light of the UPS rules and regulations, I redid the calculation using the calculator below.  My original argument still stands. So, I have reproduced it below for readers who may not have seen the earlier article. It is also reinforcement for me.

I have discussed a simple thumb rule for deciding between the Unified Pension Scheme and the National Pension Scheme and published a calculator based on this logic. This calculator also compares the UPS and NPS schemes and lets you decide which is better. However, there are too many projections involved, so I prefer the withdrawal rate method.

Let’s look at this issue from a slightly different angle. Determine your monthly expenses that will continue in retirement (excluding expenditures for parents, children, and EMIs). Let us denote this as E.

How does ‘E’ compare with ‘B’, your current basic pay (excluding DA)?

If E is much lower than B, your salary is comfortably large (for your lifestyle). This also means you can invest a good amount for retirement in instruments other than NPS (if you appreciate the importance of retirement planning!).

If your salary is high, the minimum guaranteed pension from UPS will also be high, as will your NPS corpus. If you also factor into your other investments, your withdrawal rate (annual expenses divided by total retirement corpus) will be quite low (than the “standard” 4%).

You are not dependent on the UPS pension. If you wish to use UPS, it will only be one component of your retirement portfolio to create a guaranteed income floor; for details, see Creating the Ideal Retirement Plan with Income Flooring!

This is the case with me. My current withdrawal rate (you can use the calculator linked above to determine yours) is well below the 3.5% limit set in the tool. I expect my future withdrawal rate to be smaller if I retire as expected.

Therefore, it makes sense for me to stay in the NPS without opting for the UPS. This gives me access to 60% of the NPS corpus. I can always create an income floor with the mandatory 40% of the corpus.

Also, having seen my NPS corpus grow from zero to hero over 18 years, I am emotionally attached to it, and I do not wish to lose control over that.

As I write this, I fully appreciate that this will not be the case for many government employees, especially when E  is comparable or higher than B. If the salary is low, and investments in other instruments are low or zero, then the dependence on the NPS corpus will be high. In many such cases, UPS could make better sense. Use the calculator and decide: Revised UPS vs NPS Calculator after Jan 2025 Gazette Notification.

The only point I wish to convey is that we should not simply compare products and decide which is better. Instead, we should look at our circumstances holistically and choose which would be better for us.