UPS Scheme: Is improved UPS will benefit government employees ? what are the doubts

UPS Scheme: The government of India has approved the Unified Pension Scheme for the  government employees. If they join this Unified Pension Scheme they can see a significant increase in their pension as the government's contribution in their pension will increase from 14% to 18.5%.The Calculations done by UTI Pension Fund for those who may get after joining  this scheme will get a monthly salary of Rs 50,000, this increase will be about 19% and their corpus will increase by 3% annually. There will be a compounded increase of 8% in their corpus annually, which is less than the returns being given by the three fund managers. This corpus may be even bigger as it does not include  allowance and pay commission awards received during the service period. Similarly, the monthly pension payment does not include Dearness Relief. However currently, there are three pension fund managers for government employees.

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They are

SBI, LIC and UTI.

Know the fact and figure

< Pension of the monthly will increase by about 19%

< Contribution of Government increase from 14% to 18.5%

However right now there are 3 pension fund managers for employee According to data available on the NPS Trust, hence  its inception in April 2008, the highest return of 9.75% has been given to central government employees by the SBI Pension Fund while for state governments, the LIC Pension Fund has given the highest return of 9.56% since June 2009. Similarly, the UTI Pension Fund has calculated the annuities based on a 6% annual return while the insurance companies currently offer returns ranging from 5.6% to more than 7%. Under the rules, government employees have three investment options. The default option is used by 95% of the customers. It allows 65% investment in government securities, 15% in equity and 20% in corporate.

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Rate of profit and much loss

The third option is for Moderate Life Cycle Fund. It allows people up to 35 years of age to invest 50% of the corpus in equities, 30% in corporate bonds and the remaining 20% in government securities. When the subscriber turns 35, the allocation to equities declines by 2% annually. When he turns 55, 80% of the corpus is invested in government securities and the remaining 20% is allowed to be divided equally between equities and corporate bonds. The Fund managers said the corpus should be large to earn 50% of the average salary for 12 months as pension. The objective will not be met with a 14% contribution by the government; the employee's contribution has been maintained at 10%. if  further market returns fall, the government may have to increase its share of contribution. D Swarup, former chairman of the Pension Fund Regulatory and Development Authority has said  that the new UPS is good for retiring employees. But they will lose the opportunity to potentially earn higher returns the government employees can get return of 50%.