The Union Budget for 2025 is just around the corner, with Union Finance Minister Nirmala Sitharaman set to present it in Parliament on February 1, 2025. In a significant move, the government, led by Prime Minister Narendra Modi, has officially rolled out the Unified Pension Scheme (UPS) for central employees. They’ve also confirmed when this new pension scheme will kick in.
The UPS will start on April 1, 2025
The government has issued a gazette notification regarding the Unified Pension Scheme. To give you some background, the central government introduced the UPS in August 2024, aiming to strike a balance between the Old Pension Scheme (OPS) and the National Pension Scheme (NPS). This scheme guarantees a pension for government employees after they retire, helping to secure their financial future.
Who will benefit from this scheme?
Reports indicate that the government notified the unified pension scheme for central employees under the NPS on Saturday, January 25, 2025. This scheme will apply to central government employees who are part of the NPS and opt for the UPS option.
Central government employees have the option to either go for the Unified Pension Scheme (UPS) under the New Pension Scheme (NPS) or stick with the NPS without the UPS option. The government has made it clear that those who opt for the UPS won’t be eligible for any other policy perks, changes, or financial benefits.
This decision is expected to put more strain on the government’s finances. Union Minister Ashwini Vaishnav shared all the details about the UPS on August 24, 2024. Under the NPS, employees currently contribute 10% of their basic salary, while the government contributes 14%. However, starting April 1, 2025, with the UPS in place, the government’s contribution will increase to 18.5% of the employee’s basic salary. This change is projected to add an extra burden of Rs 6250 crore to the government treasury in the first year.
So, what’s the deal with the UPS? About 23 lakh central employees will benefit from this scheme, which guarantees a pension equal to 50% of the average basic salary over the last 12 months after retirement, provided they have served for at least 25 years. Additionally, the pension will be adjusted periodically for dearness relief (DR).
If an employee passes away, 60% of their pension will be passed on to a qualifying family member. For those who have served for at least 10 years, there’s a minimum pension guarantee of Rs 10,000.
On top of that, UPS offers other significant benefits, including a lump sum payment upon retirement, calculated as one-tenth of the basic salary plus dearness allowance for every six months of service. However, the gratuity amount under this scheme might be lower than what was offered under the Old Pension Scheme (OPS).