The recently announced Unified Pension Scheme (UPS) for Central Government employees will be available only to those who are currently subscribers of the New Pension Scheme (NPS). These include retired employees as well. Under the UPS scheme, employees are guaranteed 50 percent of their average basic salary as a pension in the last 12 months before retirement if they have a minimum qualifying service of 25 years. According to Bhasha’s news, the amount received in NPS depends on the returns from the market.
Pension of Rs 10,000 per Month on Retirement
As per recent media reports, the Union Cabinet has approved the UPS scheme, which will ensure a monthly pension of Rs 10,000 for government employees upon retirement, provided they have served at least 10 years. Under this scheme, pensions are calculated on a proportionate basis, addressing long-standing concerns related to the National Pension System (NPS), which was introduced on January 1, 2004. Unlike the Old Pension Scheme (OPS) that provided 50 percent of the last basic salary as pension, UPS requires employees to contribute 10 percent of their basic salary and dearness allowance. The Central Government will contribute 18.5 percent.
Over 90 Lakh Government Employees to Benefit
Information and Broadcasting Minister Ashwini Vaishnav recently announced that 23 lakh central government employees will benefit from the new UPS scheme. If states adopt the UPS framework, over 90 lakh employees who are currently under NPS will gain from it. The Maharashtra government, facing upcoming assembly elections, has announced its adoption of UPS, becoming the first state in the country to do so.
Key Provisions Under NPS
Under NPS, employers contribute 14 percent, and employees contribute 10 percent. However, unlike OPS, where employees were guaranteed a specific pension amount without contributions, NPS payouts depend on market returns, as funds are primarily invested in government securities. Dissatisfied with NPS, several non-BJP-ruled states have decided to return to OPS, offering benefits like dearness allowance (DA).
Additional Cost of Rs 6,250 Crore Annually
The Union Cabinet’s approval of UPS on August 24 comes ahead of state elections, fulfilling long-standing demands from government employees. While UPS will provide assured pensions for 23 lakh central government employees, those opting for it cannot revert to NPS. The scheme is expected to cost an additional Rs 6,250 crore annually, subject to adjustments based on employee numbers. Retiring employees before March 31, 2025, will also receive Rs 800 crore in outstanding NPS amounts if they choose UPS.