On Saturday, Prime Minister Narendra Modi chaired the Union Cabinet, which approved the Unified Pension Scheme (UPS) for central government employees. This program will take effect on April 1, 2025, and will benefit 23 lakh central government workers. PM Modi stated that UPS will provide the “dignity and financial security” of employees. He expressed on X that he is proud of all government personnel for their contributions to the country’s progress.
What is a Unified Pension Scheme (UPS)?
The Central Government has implemented the Unified Pension Scheme (UPS), which provides government employees with a consistent pension based on their duration of service and most current basic wage.
According to media sources, central government employees have the option of enrolling in either the Unified Pension Scheme (UPS) or the National Pension Scheme. Additionally, current NPS subscribers from the central government will be able to transfer to the UPS. State governments will soon be allowed to establish the Unified Pension Scheme.
According to a Times of India news report, cabinet secretary-designate T V Somanathan stated that an actuarial calculation would be performed every three years to ensure that the liability is not left unfunded, as was the case with OPS, where the government had to bear the entire liability with no contributions from the employees.
According to a Times of India news source, India’s Minister of Information and Broadcasting, Ashwini Vaishnaw, stated that UPS’s “five pillars” will be implemented beginning in April of next year. Vaishnaw also stated that individuals who work for ten years will be eligible for a minimum pension of Rs 10,000, with the widow receiving 60% of the dead government employee’s pension.
There is also a one-time reward at retirement equivalent to 10% of the salary plus dearness allowance (DA) for every six months of service. The minister noted, “Upon 30 years of service, approximately six months’ worth of pay will be disbursed as a lump sum upon retirement,” and underlined that this payment is independent of gratuity.
Let us now look at five major characteristics of the Unified Pension Scheme, as announced by the Press Information Bureau on August 25, 2024.
UPS: Five Important Things to Know
Assured pension For a minimum qualifying service of 25 years, 50% of the average basic pay earned in the 12 months before superannuation. This pay is to be comparable with shorter service terms for a minimum of 10 years.
Assured family pension: 60% of the employee’s pension immediately before death.
Assured minimum pension: After ten years of service, $10,000 per month in superannuation.
Inflation indexation applies to assured pension, assured family pension, and promised minimum pension. Dearness Relief is based on the All India Consumer Price Index for Industrial Workers (AICPI-IW), as is the case with service personnel.
In addition to gratuity, a lump sum payment of 1/10th of monthly earnings (pay + DA) as of the date of superannuation is made for every six months of service completed. This payment has no impact on the amount of the secured pension.
What is NPS?
What is NPS?
With effect from January 1, 2004, the Central Government established the National Pension Scheme (NPS), a defined contribution-based pension scheme that replaced the old Defined Benefit Pension system.
In the NPS, a government employee contributes to his or her pension from his or her monthly income, and the employer matches that contribution. The monies are subsequently invested in designated investment plans by Pension Fund Managers.
The Union Cabinet, chaired by the Prime Minister Shri Narendra Modi, today approved the Unified Pension Scheme (UPS).
The salient features of the UPS are:
The salient features of the UPS are:
• Assured pension: 50% of the average basic pay drawn over the last 12 months prior to superannuation for a minimum qualifying service of 25 years. This pay is to be proportionate for lesser service period upto a minimum of 10 years of service.
• Assured family pension: @60% of pension of the employee immediately before her/his demise.
• Assured minimum pension: @10,000 per month on superannuation after minimum 10 years of service.
• Inflation indexation: on assured pension, on assured family pension and assured minimum pension
Dearness Relief based on All India Consumer Price Index for Industrial Workers (AICPI-IW) as in 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
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