The central government has announced the Unified Pension Scheme (UPS), a new option for central government employees under the National Pension Scheme (NPS). Under UPS, employees will receive a fixed pension after retirement, whereas in NPS, the pension amount depends on the market. UPS also guarantees a minimum monthly pension of ₹10,000.
The Unified Pension Scheme (UPS) will be implemented from April 1, 2025. If an employee chooses to switch from NPS to UPS, they cannot return to NPS later. This scheme is available only to central government employees currently covered under NPS. In this article, we will explain how much pension you will get based on your years of service.
How to Avail the Benefit
If an employee is covered under NPS and is in service on the date of UPS implementation, their funds from the Permanent Retirement Account Number (PRAN) will be transferred to their fund under UPS.
Government Contribution to Pension to Increase
Currently, the government’s contribution to the pension of central government employees is 14%. Under UPS, this will increase to 18.5%. At the same time, employees will need to deposit 10% of their basic salary and dearness allowance into UPS.
How Pension Will Be Calculated
Pension under UPS will be calculated according to the following formula:
Pension = 50% × (Total basic salary of the last 12 months / 12)
- If the service period is 25 years or more, the employee will receive the full pension.
- If the service period is less than 25 years, the pension will be reduced proportionately.
Examples of Pension Calculation
Example 1: Full Pension (25+ years of service)
If an employee’s average basic salary is ₹1,00,000, the pension will be calculated as:
50% × ₹1,00,000 = ₹50,000 per month.
Example 2: Short Service Period (less than 25 years)
If an employee serves for 20 years and their average basic salary is ₹1,00,000, the pension will be:
50% × ₹1,00,000 × (20/25) = ₹40,000 per month.
Superb benefits for government employees. UPS (Unified Pension Scheme) is nothing but OPS (Old Pension Scheme) plus extra new benefits added to employees. The NPS (New Pension Scheme) implemented by Vajpayee has been quietly buried.
Vajpayee and MMS had courage which is… pic.twitter.com/RZcshFODfA
— D.Muthukrishnan (@dmuthuk) August 25, 2024
Example 3: Minimum Guaranteed Pension
If someone’s basic salary is ₹15,000, according to the formula, the pension will be ₹7,500. However, since there is a minimum guarantee of ₹10,000, they will receive ₹10,000 per month.
Benefits of the Unified Pension Scheme
Central government employees will benefit from a stable and assured pension through UPS. This is especially beneficial for employees who wish to avoid the risks of market-based earnings.