Pension questions now come in almost every banking exam, mainly because of the Unified Pension Scheme (UPS) debate. To answer them well, you need to know three schemes clearly: the old pension, the NPS and the UPS. Let us start with the regulator.
PFRDA
| Point | Detail |
|---|---|
| Full name | Pension Fund Regulatory and Development Authority |
| Set up | 2003 (by government resolution); statutory under the PFRDA Act, 2013 |
| Headquarters | New Delhi |
| Regulates | NPS, APY, UPS (as an option under NPS) |
| Appeals | Securities Appellate Tribunal |
National Pension System (NPS)
- Introduced for new central government employees (except armed forces) joining on or after 1 January 2004.
- Opened to all citizens from 1 May 2009.
- It is a defined contribution scheme: your pension depends on how much is contributed and how the market performs.
| Feature | Detail |
|---|---|
| Tier I | Main pension account; withdrawals restricted |
| Tier II | Voluntary savings account; free withdrawals |
| Age to join | 18–70 years (approx) |
| Government contribution (central employees) | 14% of basic + DA; employee 10% |
| At 60 | At least 40% of the corpus must buy an annuity; up to 60% can be withdrawn tax-free |
| Record keepers | Central Recordkeeping Agencies (CRAs), e.g., Protean (NSDL), KFintech, CAMS |
Unified Pension Scheme (UPS)
The UPS came out of the T.V. Somanathan Committee review of NPS (set up in 2023).
| Feature | Detail |
|---|---|
| Notified | 24 January 2025 |
| Effective | 1 April 2025 |
| Who | Central government employees under NPS who opt for it |
| Assured pension | 50% of the average basic pay of the last 12 months, for 25 years of service |
| Minimum pension | ₹10,000 a month after at least 10 years of service |
| Family pension | 60% of the employee’s pension |
| Inflation | Dearness relief on pension |
| Government contribution | 18.5% of basic + DA (approx) |
| Lump sum | One-tenth of monthly emoluments for every six months of service, at retirement |
Old pension vs NPS vs UPS
| Point | Old Pension Scheme | NPS | UPS |
|---|---|---|---|
| Type | Defined benefit | Defined contribution | Hybrid (assured + contributory) |
| Employee pays | Nothing | 10% | 10% |
| Pension | 50% of last basic pay | Market-linked annuity | 50% of last 12 months’ average basic |
| Inflation protection | Yes (DA) | No | Yes (dearness relief) |
| Fiscal burden | Very high | Low | Moderate |
Atal Pension Yojana (APY)
- Launched on 9 May 2015 for the unorganised sector.
- Age to join: 18–40 years.
- Guaranteed pension of ₹1,000 to ₹5,000 a month from age 60.
- From 1 October 2022, income taxpayers cannot join.
- Administered by PFRDA; the government guarantees the minimum pension.
NPS Vatsalya
- Launched in September 2024 for minors: parents open and contribute to an NPS account for their child.
- It converts to a normal NPS account when the child turns 18.
EPFO
- Set up under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952.
- Runs three schemes: EPF (1952), EDLI (1976) and EPS (1995).
- Comes under the Ministry of Labour and Employment.
Exam-ready one-liners
- PFRDA became statutory under the PFRDA Act, 2013.
- NPS: central employees joining on or after 1 January 2004; all citizens from 1 May 2009.
- UPS: effective 1 April 2025; 50% of average basic pay of the last 12 months for 25 years’ service.
- UPS minimum pension: ₹10,000 after 10 years; family pension 60%.
- APY: ages 18–40; pension ₹1,000–5,000; income taxpayers excluded since October 2022.
- NPS Vatsalya (September 2024) is for minors.
Related reading
Quiz: test yourself
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Based on PFRDA and government notifications as reported. Check pfrda.org.in for the latest rules.
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