The Unified Pension Scheme (UPS) for Central government employees will take effect from April 1, 2025, offering an enhanced pension option under the existing National Pension System (NPS). Once an employee, whether current or future, opts for the UPS, they cannot revert to the NPS. The scheme guarantees a monthly pension equal to 50% of the average basic pay from the last 12 months before retirement, provided the employee has completed at least 25 years of service. Those with 10 to 25 years of service will receive a minimum monthly pension of ?10,000. If an employee takes voluntary retirement after 25 years of service, pension payments will commence from their normal retirement date. In the event of the pensioner’s death, the family will receive 60% of the pension amount, and all payments will be adjusted for inflation through dearness relief linked to the All-India Consumer Price Index.
Employees covered under the UPS will receive a lump sum amount at the time of superannuation, in addition to gratuity. This lump sum is calculated as one-tenth of the employee’s monthly salary (including pay and dearness allowance) for every six months of completed service, without affecting the guaranteed pension amount. The scheme is seen as an improvement over the NPS by providing assured pension benefits and protection against inflation. The government has encouraged state governments to implement the scheme for their employees, with a significant number of state and central government employees already contributing to the NPS, which currently holds a corpus of ?11.7 lakh crore, with ?9 lakh crore contributed by government employees.
The UPS will feature two types of funds: an individual corpus with contributions from both employees and the government, and a pool corpus funded by additional government contributions. Employees will contribute 10% of their basic pay plus dearness allowance, which will be matched by the government. Additionally, the government will contribute an estimated 8.5% of basic pay and dearness allowance to the pool corpus for employees who opt for UPS. Employees can choose from various investment options for their individual corpus, with a default option managed by the Pension Fund Regulatory and Development Authority (PFRDA) in case they do not make a selection.
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