Unified Pension Scheme: Know All About New Pension Scheme For Govt Employees

Unified Pension Scheme: Some 23 central governments and 90 state governments are likely to benefit from the newly launched Unified Pension Scheme (UPS). The Cabinet led by Prime Minister Narendra Modi has approved an expenditure of Rs 800 crore for arrears, while the annual cost increase is expected to be approximately Rs 6,250 crore in the first year.

The UPS scheme is going to come into effect from April 1, 2025.

The newly launched UPS is going to be an alternative to the popularly-available national pension scheme (NPS). The new central government employees will have the option to choose between NPS and UPS. While existing government employees NPS subscribers will also get the option to switch to UPS.

On the launch of UPS, PM Modi via his X handler said, "Met a delegation of staff side from the Joint Consultative Machinery for Central Government employees. They expressed joy on the Cabinet's decision regarding the Unified Pension Scheme."

Modi further added, "We are proud of the hard work of all government employees who contribute significantly to national progress. The Unified Pension Scheme ensures dignity and financial security for government employees, aligning with our commitment to their well-being and a secure future."

UPS will come into place after two decades of NPS which was launched on January 1, 2004. Government employees except for armed forces, on or after April 1, 2004, are eligible for NPS. Notably, NPS is a market-linked defined contribution scheme that helps you save for your retirement.

According to Information and Broadcasting and Railway Minister Ashwini Vaishnaw, the UPS comes after many concerns raised by government employees who demanded several modifications. Hence, a committee formed by PM Modi conducted a thorough investigation, involving 100 meetings with various organizations and almost all states in the country.

Moreover, Vaishnaw revealed that the government took inputs from a wide range of stakeholders including RBI and World Bank. Based on recommendations and extensive deliberations, the committee put forth the Unified Pension Scheme (UPS).

He further said that UPS is introduced to address issues that government employees are facing and to streamline the pension system for enhanced efficiency and effectiveness.

Unified Pension Scheme - EXPLAINED!

Salient Features of UPS as per the Cabinet are:

- Assured pension: 50% of the average basic pay drawn over the last 12 months before superannuation for a minimum qualifying service of 25 years. This pay is to be proportionate for a lesser service period up to a minimum of 10 years of service.

- Assured family pension: @60% of the pension of the employee immediately before her/his demise.

- Assured minimum pension: @10,000 per month on superannuation after a minimum of 10 years of service.

- Inflation indexation: on assured pension, on assured family pension and assured minimum pension

Dearness Relief based on the All India Consumer Price Index for Industrial Workers (AICPI-IW) as in the case of service employees

- lump sum payment at superannuation in addition to gratuity

1/10th of monthly emoluments (pay + DA) as on the date of superannuation for every completed six months of service this payment will not reduce the quantum of assured pension.