Explained: How you’ll benefit if you opt for Unified Pension Scheme (UPS)

The Union Cabinet on Saturday (August 24) approved the Unified Pension Scheme (UPS), which is expected to benefit about 23 lakh central government employees.

The UPS will be applicable from April 1, 2025, to all those retired and retiring till March 31, 2025, with arrears, Cabinet Secretary-designate TV Somanathan told the media on Saturday. Here are the salient features of the UPS:

1. Assured pension

Employees who have served for 25 years or more will receive a guaranteed pension calculated at 50 per cent of the average basic pay they received over the 12 months immediately prior to retirement. Those who served for anything between 10 and 25 years will receive pension proportionate to their tenure. The minimum required service period to qualify for UPS has been set at 10 years.

2. Assured minimum pension

If an employee has served for at least 10 years, they will receive a minimum pension of Rs 10,000 per month upon superannuation.

3. Assured family pension

Upon a pensioner’s demise, his/her spouse will receive family pension calculated at 60 per cent of the pension the employee received immediately before her/his demise.

4. Inflation indexation (Dearness Relief)

Just like employees in service, pensioners will enjoy Dearness Relief based on the All-India Consumer Price Index for Industrial Workers (AICPI-IW).

5. Lump-sum payment at superannuation

In addition to gratuity, employees will receive a lump-sum payment when they retire. This lump sum will be calculated at 1/10th of their monthly emoluments (salary + DA) as on the date of retirement for every completed six months of service. This payment will not be deducted from the quantum of assured pension.

6. UPS available as an option to employees

Existing pensioners under the National Pension Scheme (NPS) — including after superannuation and those who opted for VRS (Voluntary Retirement Scheme) — as well as future employees will have the option of joining the UPS. This choice can be exercised only once, after which it will be final. Past retirees will receive arrears with interest at Public Provident Fund (PPF) rates.

7. State governments can adopt UPS

State governments can also opt for the UPS, and if all of them do, some 90 lakh people will come under the ambit of the UPS.

Transformation of NPS

The UPS announcement comes right ahead of the assembly elections in Haryana and Jammu and Kashmir, fulfilling long-pending demands of government employees for guaranteed pension.

The UPS essentially marks a transformation of the NPS, which promised pensions based on contributions made by employees and the government.

NPS has been implemented for all government employees except those in the armed forces joining the central government on or after January 1, 2004. Now, the Union Cabinet has approved assured pension for them, provided they opt for the UPS.

The announcement came against the backdrop of several non-BJP states deciding to revert to the DA-linked Old Pension Scheme (OPS), and employee organisations in some other states also raising demands for it.

Under the OPS, retired government employees received 50 per cent of their last drawn salary as monthly pension. The amount kept increasing with the hike in the DA rates. OPS is not fiscally sustainable as it is not contributory, and the burden on the exchequer keeps mounting.

(With agency inputs)