The government has outlined two formulas for calculating the lump sum amount you will receive in retirement. (Representative/File photo)
How much will employees receive when they retire after 25 years of service, combining superannuation and new lump sum formula
After 20 years, the issue of labor pensions has come to the forefront again. In early 2004, the central government replaced the Old Pension System (OPS) with the New Pension Scheme (NPS), triggering widespread protests from employees and their organizations. Now, the Modi government has launched the Unified Pension Scheme (UPS), which aims to improve the previous system.
However, employees have expressed serious concerns about the clarity of UPS retirement benefits, as the government has yet to provide clear details on the amount they will receive.
Some workers' groups claim the government will not refund the money deposited by employees along with the interest accrued. Instead, a fixed formula for receiving a lump sum on retirement was introduced.
Shiv Gopal Mishra, secretary of the National Central Employees Council, said they have demanded full return of their deposits. However, the government only agreed to provide a one-time payment based on a fixed formula.
The government has outlined two formulas for calculating the lump sum amount you will receive in retirement. According to an official notification, employees will receive gratuity and a one-time amount based on a fixed formula. Let us use a case to understand how much money a person can get after retirement after working for 25 years.
Tips are calculated based on 15 days' wages per month of service. The formula involves multiplying the total length of service by the last salary earned, then multiplying that amount by 15 days, and finally dividing by 26.
For example, if an employee's last salary before retirement was Rs 1.30 lakh and he has worked for 25 years, his total pension will be Rs 18.75 lakh, which will be provided on retirement.
The government has introduced another lump sum formula under the Unified Pension Scheme (UPS). Accordingly, employees will receive 10% of their salary for every six months they work.
For example, if an employee works for 25 years and earns a monthly salary of Rs 80,000, his income in 6 months will be Rs 4.80 thousand. 10% of his service fee for six months (Rs 4.80 lakh) is equivalent to Rs 48,000. In his 25-year working career, there were a total of 50 half-year periods throughout the working period. After multiplying this amount by 50 half-year periods, the total amount comes to Rs 24 lakh.
The government notification stated that in addition to pension, a lump sum amount will be released as pension. Now, if tips and one-time amounts are added, the total would be Rs 42.75 lakh (plus Rs 24 lakh and Rs 18.75 lakh).
