Pension Scheme: Navigating the Shift from New to Old Pension Scheme

Sunday, 25 August 2024, 16:02

Pension scheme dynamics are shifting as the UPS revives elements of the old pension scheme. This transition raises critical questions about sustainability and employee benefits under this defined benefit framework.
Financialexpress
Pension Scheme: Navigating the Shift from New to Old Pension Scheme

Pension Scheme Unveiled: The Unified Pension Scheme

The recent cabinet briefing on the Unified Pension Scheme (UPS) signals a potential return to old pension scheme policies, inviting extensive discussions on its implications.

Understanding the Shift from New to Old Pension Scheme

The UPS presents a defined benefit pension landscape that guarantees a calculated benefit to employees, contrasting sharply with the uncertainties of the National Pension Scheme (NPS).

Key Features of UPS

  • Defined Benefit Structure: Ensures 50% of the average basic pay over the last year as pension.
  • Employee Contributions: Fixed contributions of 10% from employees and 18.5% from the government.
  • Family Pension and Dearness Relief: Introduced within the UPS framework.
  • Government Responsibility: The ultimate cost of benefits now rests on the government, removing employee uncertainties.

Long-term Considerations and Risks

While UPS proposes a beneficial framework, the sustainability of these defined benefits is contingent on various unpredictable factors, including investment returns and life expectancy.

  1. Projected Cashflow: A measure of fund sustainability based on inflows and outflows.
  2. Present Value of Obligations: Evaluating contribution adequacy against projected pension obligations.

In closing, although the UPS offers promising prospects, significant uncertainties linger regarding its operational details and risks associated with the return to a defined benefit model. Ongoing actuarial insights will be crucial in navigating this complex landscape.


This article was prepared using information from open sources in accordance with the principles of Ethical Policy. The editorial team is not responsible for absolute accuracy, as it relies on data from the sources referenced.


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