The Modi administration has made a significant move for central employees in its third term. On Wednesday, the Union Cabinet approved a proposal that will allow 23 lakh government employees who join under the National Pension System (NPS) to receive a pension amounting to 50 percent of their salary. This initiative is known as the Integrated Pension Scheme (UPS). Many central employees have questions about this new scheme, so let’s address those inquiries in various ways.
What is UPS?
With this scheme, government employees will be eligible to receive 50 percent of their average basic salary from the last 12 months before retirement as their pension. To qualify for this full pension, employees must have a minimum service period of 25 years. However, those with at least 10 years of service will receive a proportionate pension.
Who is the program for?
The National Pension System (NPS) applies to all central government employees who began their service after April 1, 2004. Employees who joined after this date or are set to retire by April 1, 2025, will also have the option to choose this scheme. Unlike the defined benefits available to pre-NPS employees, this pension scheme is based on contributions.
How is it different from NPS?
Under the UPS, employee contributions remain at the same level as the current NPS rate of 10 percent, while the government has increased its contribution from 14 percent to 18.5 percent. Additionally, Dearness Relief (DR) will be provided at the same rate as the Dearness Allowance. This means that half of the total salary will be allocated in UPS, similar to the pension received under the previous pension scheme.
The pension scheme also includes provisions for family pensions, guaranteed minimum pensions, and lump sum payments upon retirement, which are not features of the NPS.
When will it become relevant?
The new plan will be effective starting April 1, 2025. Once it is implemented, NPS account holders can choose the Integrated Pension Scheme, also known as UPS. In this financial year, the government is expected to incur around Rs 800 crore in arrears because of the UPS implementation, and approximately Rs 6250 crore will be allocated for UPS expenses.
