The Finance Ministry urges other ministries and departments to take measures and accelerate the rolling out of the Unified Pension Scheme (UPS). The government implemented UPS effective April 1, 2025, for the central government employees. However, according to a Financial Express report, only around 1500 employees have exercised their option until now.
However, it is too early to say that the scheme does not have takers because the deadline to exercise the option is June 30, 2025, three months from its implementation date. Reportedly, the Ministry of Finance has directed the pay and accounts offices (PAOs) of the central government ministries to expedite the process.
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The ministry emphasised the importance of training staff to implement the scheme within the specified timeframe.
The scheme offers a guaranteed pension of at least Rs 10,000 upon completion of 10 years of service and a maximum of 50 per cent of salary (average basic pay of the last 12 months of service) after completing 25 years of service.
The element of guarantee is the main attraction of the scheme.
However, the slow uptake can be attributed to the one-time option. Note that until the UPS was implemented, the National Pension System (NPS) used to be the default option.
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Now, there are two options available to select from, but the choice is available only once and cannot be reversed. Thus, it may be the irrevocable nature of the option that is compelling people to think through the merits and demerits of both schemes and select the option based on their individual preferences and requirements.
However, according to the experts, one should also consider one's age, risk profile, and number of years to retirement along with preferences before exercising the irreversible option.
Note that UPS differs from NPS due to its guaranteed pension feature. While both pension schemes are contributory in nature, UPS assures a fixed pension payout upon superannuation, but NPS does not promise any amount for payment. In the long term, experts believe that NPS can be beneficial.
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UPS guarantees a pension to the subscriber, and upon the pensioner's death, an assured family pension is provided. However, in NPS, an annuity is created on at least 40 per cent of the corpus, which can be increased upon the subscribers' choice. Notably, NPS offers different types of annuities, such as one can opt for the return of the initial purchase price.
In the case of the NPS, the total contribution consists of 10 per cent from the employee and 14 per cent from the government. In contrast, the total contribution in UPS consists of 10 per cent from the employee, and 18.5 per cent from the employer. However, only 10 per cent of the 18.5 per cent goes toward the employee's Permanent Retirement Account Number (PRAN) account, while the remaining 8.5 per cent is allocated to the pool corpus for pension payments.
