Unified Pension Scheme

The Union Cabinet approved the Unified Pension Scheme (UPS) on August 24, 2024, guaranteeing 50 per cent of the salary as assured pension for central government employees. Over 2.3 million central government employees are expected to benefit from it, and states have also been given the option to implement UPS. Maharashtra has become the first state to implement this. It will be effective from April 1, 2025. Currently, the government provides the National Pension System (NPS) to central government employees, where employees contribute 10 per cent of their salary, and the government 14 per cent.

What is UPS?

• This scheme is similar to the Old Pension Scheme (OPS) in terms of benefit, as it guarantees a fixed pension at the time of retirement.
• UPS will offer 50 per cent of the average basic pay drawn over the last 12 months prior to superannuation.
• In terms of functioning, this scheme is quite similar to NPS, with both the employee and employer making contributions.
• Under UPS, the employee will contribute 10 per cent, while the government 18.5 per cent.
• In contrast, under NPS, the employer’s contribution is 14 per cent. OPS, on the other hand, was fully government funded.

What It Offers

• Guarantees 50 per cent pension of the average basic pay received over the last 12 months, provided the individual has a minimum qualifying service of 25 years.
• Assures minimum pension of Rs 10,000 per month.
• It provides family pension benefits at 60 per cent of the employee’s pension in case of the employee’s death.
• Pays a lump sum at superannuation in addition to pension and gratuity.
• The lump sum payment would be one-tenth of monthly emoluments (pay + DA) as on the date of superannuation for every completed six months of service.

Will It Benefit You?

• Since it will provide regular cash flow, government employees can look forward to a stable and predictable retirement.
• The dependents, including the spouse and minor children, of the retiree will have something to support them in case of an unfortunate event.
• The fact that you will get a lump sum along with the pension amount will help you take care of bigger expenses post retirement, such as children’s education or buying a house.
• The pension amount will be indexed based on the All India Consumer Price Index for Industrial Workers released every month. This means the amount will be inflation agnostic.