Comparing Pension Systems: UPS vs. NPS

This analysis compares two retirement systems for government employees: the Unified Pension System (UPS) and the National Pension System (NPS). Key differences are highlighted regarding contribution amounts, with a higher government contribution to NPS, although the UPS includes a separate pool fund. While both systems offer similar investment choices, the UPS introduces a risk where underperforming investments require the employee to compensate the difference. The primary difference in payout lies in the UPS providing a formula-based pension linked to final salary, while the NPS payout depends on annuity purchases and withdrawals. Crucially, the UPS pension is inflation-linked, offering a potential advantage over the NPS, although the NPS offers greater flexibility in terms of accessing funds before retirement, portability, and inheritance.