Another mega update is here regarding UPS. The central government rolled out the Unified Pension Scheme last year, which guarantees a pension for central government employees who are part of the National Pension System (NPS). However, they’ve made it clear that those who prefer to stick with NPS can still do so. So, government employees can choose between NPS and UPS.
This new scheme is specifically for Central Government employees already enrolled in NPS and is set to kick off on April 1, 2025.
Both NPS and OPS benefits are included in UPS
It’s worth noting that various labor groups and stakeholders have been pushing for the return of the Old Pension Scheme for quite some time. In response, the Central Government has tried to strike a balance with this new scheme by incorporating features from both NPS and OPS.
With NPS, government employees can benefit from growth through equity and debt investments, while OPS provides a stable pension after retirement.
Recently, an MP asked the government if UPI is replacing the current National Pension Scheme (NPS) and whether a committee has been formed with government and employee representatives to address some ongoing issues. The MP also wanted to know about the committee’s findings and how they would be implemented.
In reply, Minister of State for Finance Pankaj Chaudhary stated that a committee led by the Finance Secretary was set up to revise the National Pension System (NPS) to enhance pension benefits for government employees, considering the fiscal impact and overall budget.
The Minister announced that the Committee engaged in thorough discussions with important stakeholders, including representatives from the employee side of the National Council and the State Government. Following the Committee’s recommendations, the Union Cabinet approved the Unified Pension Scheme (UPS) on August 24, 2024. The UPS was officially notified on January 24, 2025, and is set to be implemented starting April 1, 2025.
Key Features of UPS
Guaranteed Pension
Under the UPS, pensioners will receive 50% of their average basic salary from the last 12 months prior to retirement, provided they have completed a minimum of 25 years of service. For those with shorter service periods (at least 10 years), a proportionate pension will be granted. It’s important to note that government employees who have served between 10 and 25 years will also receive a proportionate pension upon retirement.
Family Pension
This scheme includes a family pension provision. In the event of an employee’s death, their spouse will receive 60% of the pension amount that the employee was receiving prior to their passing.
Minimum Pension Guarantee
The UPS ensures a minimum pension of Rs 10,000 for employees who retire after at least 10 years of service. Therefore, if you are a central government employee with a decade of service, you will be entitled to a monthly pension of at least ten thousand rupees after retirement.
Inflation Protection
Similar to the Dearness Relief (DR) provided to serving employees, the pension amount will be adjusted for inflation based on the All India Consumer Price Index for Industrial Workers (AICPIN-IW). This means that the pension will increase in line with inflation rates.
Lump Sum Payment at Retirement
Upon retirement, employees will receive a lump sum payment in addition to their gratuity. This amount will be calculated as 1/10th of their last monthly salary (basic salary plus DA) for every six months of service. Importantly, this benefit will not impact the guaranteed pension amount, and gratuity will be calculated as of the retirement date.
The implementation date for the Unified Pension Scheme (UPS) is set for April 1, 2025. This new scheme is regarded as a pension product that offers a guaranteed pension facility, thereby providing greater financial security to government employees compared to the National Pension System (NPS). It is anticipated that the government will soon release guidelines concerning the transition from the NPS to the UPS.