7th Pay Commission: NPS vs UPS pension at Level 1 of Pay Matrix at 8-10% returns compared

3 min read | Updated on May 22, 2025, 14:26 IST

SUMMARY

NPS vs UPS: While the Unified Pension Scheme is suitable for employees who want an assured pension on retirement, NPS is for those who may like to benefit from higher market-linked returns in the course of their service years.

UPS is available as an option for NPS subscribers. | Image source: Shutterstock

Central Government employees can now compare expected pensions from the National Pension System (NPS) and Unified Pension Scheme (UPS) through the UPS calculator recently launched by the NPS Trust.

The UPS calculator works as an indicative tool to help NPS subscribers in making an informed choice.

While UPS is suitable for employees who want an assured pension on retirement, NPS is for those who may like to benefit from higher market-linked returns in the course of their service years.

For the benefit of Central Government employees, we have used the UPS calculator to find out how much pension subscribers in the entry Level 1 of the 7th Pay Commission's Pay matrix can expect through both schemes at an assumed 8% and 10% returns. We are assuming that the employee has just joined service and has no corpus in his NPS Tier 1 account.

While using the calculator, employees need to provide the following inputs:

Employee's age
Date of joining
Retirement age
Monthly Basic pay today
Existing NPS Tier 1 corpus
Annual Basic pay growth rate
Annual Dearness Allowance (DA) growth rate
Expected return on investment
Final Lump sum withdrawal percentage
Annuity rate after retirement
Life expectancy
Surviving spouse's life expectancy

UPS vs NPS for Level 1 employees under the 7th Pay Commission

The minimum basic salary at Level 1 is ₹18,000. Let's see how much pension one can get at 8% and 10% returns while assuming the following:

When basic pay is ₹18,000 and returns 8%

Employee's age: 30 Date of joining: 22-05-2025 Retirement age: 60 Monthly Basic pay today: ₹18,000 Existing NPS Tier 1 corpus: 0 Annual Basic pay growth rate: 3% Annual Dearness Allowance (DA) growth rate: 4% Expected return on investment: 8% Final Lump sum withdrawal percentage: 60% Annuity rate after retirement: 6% Life expectancy: 80 Surviving spouse's life expectancy: 85

The UPS calculator shows that the employee will be eligible for a monthly payout of ₹26,171 + DR on superannuation after retirement. He will also be eligible for a final withdrawal payout of ₹99,33,761 on superannuation.

Under NPS, the monthly pension will be ₹39,735 while the final withdrawal payout at superannuation will be ₹1,19,20,513.

When basic pay is ₹18,000 and returns 10%

In this case, the UPS calculator shows the employee will be eligible for a monthly payout of ₹26,171 + DR on superannuation after retirement. He will also be eligible for a final withdrawal payout of ₹1,35,327 on superannuation.

Under NPS, the monthly pension will be ₹54,009 while the final withdrawal payout at superannuation will be ₹1,62,02,792.

Currently, UPS is available as an option for NPS subscribers in the Central Government. In case they decide to switch to UPS, they will not be able to switch back to NPS. Therefore, making an informed decision is important as pensions are meant for the entire lifetime of an employee.