New Pension Scheme for Government Employees (Unified Pension Scheme)
A summary of the unified pension scheme update
The Union Cabinet approved a new unified pension scheme for government employees, which provides 50% of their pay after retirement. The scheme is designed to replace the national pension system and also responds to the challenges faced under the old scheme.
Under the scheme, Pensioners who have served for more than 25 years would receive a 50 percent reduction in their average basic salary during the last 12 months of their service.
When will the UPS scheme come into effect?
All Central government employees who retire on or before March 31, 2025, will be eligible for UPS benefits beginning April 1 of the following year.
Key Benefits of the Unified Pension Scheme (UPS)
1. Assured Pension: Retirees with at least 25 years of service will receive a pension equal to 50% of their average basic pay from the last 12 months before retirement. The pension will be equivalent to shorter service durations, with a minimum of 10 years of service required.
2. Government contribution: The government will increase its contribution to the pension fund from 14% to 18.5%. This increase does not affect the employee’s contribution, which remains unchanged.
3. Lump-sum payment: At the time of superannuation, retirees will receive a lump-sum payment in addition to their gratuity. This payment will be equivalent to one-tenth of the monthly emoluments (pay + DA) as of the date of superannuation for every six months of completed service. Importantly, this payment will not reduce the amount of assured pension.
4. Assured Family Pension: In the event of an employee’s death, the family will receive 60% of the pension amount the employee was receiving at the time of death, ensuring ongoing financial support for dependents.
5. Assured Minimum Pension: For those with at least 10 years of service, a guaranteed minimum pension of Rs 10,000 per month is provided, offering a financial safety net for lower-income retirees.
6. Pension for Past Retirees under NPS: The scheme also applies to past retirees who have already superannuated under the NPS. These retirees will receive arrears for the past period, with interest calculated at Public Provident Fund (PPF) rates.
Who is eligible for the Unified Pension Scheme (UPS)?
All government employees joining the service after April 1, 2004, are under the NPS. Now, NPS subscribers can choose between NPS and UPS.
The Unified Pension Scheme assures a pension to employees who have served for at least 25 years. It offers an equivalent or Rs. 10,000 per month minimum pension to those who have served at least 10 years.
Additionally, the scheme will provide for an Assured Family Pension from the next financial year. This family pension would be calculated at 60 per cent of the employee’s pension immediately before their demise.
Additional Details:
The Central Government will implement the UPS, which will directly benefit approximately 23 lakh Central Government employees. It will be implemented from April 1, 2025.
The scheme’s architecture is also designed for adoption by State Governments. If fully adopted, the UPS could benefit over 90 lakh government employees currently under the NPS across India.
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