5 Major Disadvantages of Unified Pension Scheme [UPS] | 5 Major Drawbacks of Unified Pension scheme

The Unified Pension Scheme (UPS) is a new pension scheme and seems to have exciting offers and several benefits. But it’s important to look at the disadvantages or drawbacks of UPS too.

Here have pointed out five major disadvantages of UPS as of the press conferences and interviews of the higher government officers appointed in railways and other various government departments. And you should also be aware of while taking any decision:

5 Major Disadvantages of UPS

The news about the unified pension scheme has blown like a storm on social media and other online platforms. Everyone’s praising the issuing authority of this scheme but rarely are showing the clear picture that shows the backside of the coin. 

After seeing some interviews and press conferences, we have pointed out the below mentioned major drawbacks of UPS. These are:

1. Lack of Guaranteed Pension:

• Unlike the old pension schemes, the UPS does not guarantee a fixed pension on retirement. Though your retirement pension will depend on the performance of your investments in the market by your deducted money.
• For a 50% of the basic salary’s assured pension, the service tenure must be above 25 years.
• For the service period of 10 years the pension will be 10000 rupees p.m.
• This can create uncertainty, especially for those who prefer a guaranteed income after retirement.

2. Investment Risk:

• The UPS involves investing in market-linked equities, which carries the investment risk.
• If the market performance gets poor it can impact your pension.

3. Early Withdrawal Penalties:

• Withdrawing your UPS funds before retirement generally leads to the penalties.
• Thus the employees will avoid early withdrawals and limit your access to funds if in case of financial emergencies.

4. Not Certainty in Getting Retirement Funds:

• Likewise employees get a handsome amount of money at the time of their retirement as a fund under OPS. But in UPS there is no such a provision to release a lump sum fund at retirement, just a monthly pension for which you are applicable.
• It reduces your ability to get your retirement sound financially.

5. Complexity and Challenges in Transition:

• Transitioning to a UPS account can be critical, especially for the employees who are not familiar with technical issues with investments.
• It can be a risk taking and time-consuming.

Unified Pension Scheme Drawbacks 

• The foremost drawback of UPS is that it got launched in a hurry without the preparation of rules and documentation.
• None of the finance department officials have disclosed the details yet.
• If you are considering opting for the UPS, carefully evaluate your risk tolerance and retirement security.
• None of the officials in the pension department have a clear picture of it.

It is advisable to wait to get disclosed the rules and clauses for UPS from the ministry of finance. Then consulting with a financial advisor will help you to make a profitable decision for your pension.