Unified Pension Scheme (UPS) approved by Centre; to benefit 23 lakh govt employees

The Union Cabinet, chaired by Prime Minister Narendra Modi, on Saturday (August 24) approved the Unified Pension Scheme (UPS) which assures 50 per cent of salary as pension for central government employees.

"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," Modi wrote on his X (formerly Twitter) handle.

Briefing media, Cabinet Secretary-designate TV Somanathan said the new scheme is applicable from April 1, 2025.

The benefits of the Unified Pension Scheme are applicable for those retired and retiring till March 31, 2025, with arrears, he added.

What is UPS?

The scheme assures 50 per cent of salary as pension for 23 lakh government employees who joined service under the National Pension System (NPS).

The National Pension System is applicable for government employees joining the service after April 1, 2004. It was based on the premise of contribution rather than defined benefit applicable for employees prior to the NPS.

Announcing Cabinet decisions, Information and Broadcasting Minister Ashwini Vaishnaw said the Unified Pension Scheme announced that government employees will now be eligible to get 50 per cent of the average basic pay drawn over the last 12 months before the superannuation as pension.

For this full pension or 50 per cent of pay as the pension, he said, the eligibility service length will be 25 years.

However, he said, it would be proportionate for a lesser service period up to a minimum of 10 years of service.

"Today the Union Cabinet has approved Unified Pension Scheme (UPS) for government employees providing for the assured pension...50 per cent assured pension is the first pillar of the scheme...second pillar will be assured family pension...About 23 lakh employees of the central government would benefit from the Unified Pension Scheme (UPS)...There will be an option for the employees to opt between NPS and UPS," Vaishnaw said.

NPS subscribers can opt for UPS

NPS subscribers can now opt for the Unified Pension Scheme, which offers assured pension applicable from the beginning of the next financial year.

Last year, the finance ministry set up a committee under Finance Secretary TV Somanathan to review the pension scheme for government employees and suggest any changes, if needed, in light of the existing framework and structure of the National Pension System.

Several non-BJP-ruled states have decided to revert to the DA-linked Old Pension Scheme (OPS) and also employee organisations in some other states have raised demand for the same.

Salient features of UPS

1) 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.

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

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

4) 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

5) 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

(With agency inputs)