In this article, we have carried out scenario analysis of Unified Pension Scheme and New Pension Scheme so that informed decision can be taken. We have also designed dynamic calculator incorporating all possible attributes including years of service, expected annual increase in salary (due to increment, DA, promotion, Pay Commissions), Expected Return on Funds, Inflation Rate, Life Expectancy etc. so that reader can easily calculate realistic benefits of both NPS and UPS based on their actual parameters.
For Complete details about UPS in FAQ form with illustrations, please read at :Every thing to Know about UPS
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Scenario Analysis of NPS vs UPS
(* Present Value factor has been calculated at the rate of expected return after retirement).
Our Conclusions based on Scenario Analysis (Calculator is provided in Next Section)
We have separately calculated & compared the two aspects related to NPS & UPS
Benefits to the Self and Spouse during life time under UPS: There is benefit to Self and Spouse of the Employees in UPS during their life time on account of higher pension benefits that also linked to inflation as compared to NPS.
Loss to the Heir under UPS: NPS allows for the return of invested funds for purchase of Annuity to the legal heir after the death of the Employee and Spouse. Recent reports suggest that no funds will be returned to the legal heir after the death of the Employee and spouse, resulting in a loss to the legal heir in the UPS.
Therefore, there is arbitrage between benefit to the Employee and his/her spouse during their life time and loss to the legal heir after death of both under UPS.
Golden Rule of Retirement Planning is to first secure the financial security of Self and Spouse from uncertainties of future. Though harsh but a fact that, It should not be compromised for undue benefit to the children receivable after death.
Though, financially NPS may be looking attractive due to return of fund to the heirs after death of self & spouse, in our opinion, considering the the social security to Self & Spouse during life time, increasing life expectancy in India (at present around 67 years) and uncertainty involved in the future about returns on investment, UPS should be preferred over NPS with withdrawal of Retirement Fund in the range of 40 to 50%.
NPS vs UPS Calculator
(Workable in both Mobile & Computer, for better view please use in Computer)
NPS Calculator can be used to calculate individual specific benefits under both NPS and UPS.
We request you to please share your observations in the comment section for further improvement.
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For Complete details about UPS in FAQ form with illustrations, please read at :Every thing to Know about UPS
Disclaimers: This calculator and advise is dependent upon assumptions and information available in the public domain. It will be further improved based on more information as and when available in the public domain.
Since, calculator involves many complex calculations are to be involved, there is always chance for human errors. Therefore, all are requested to kind check the calculations on their own or take the advise of the financial consultants.
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