The central government officially announced the Unified Pension Scheme (UPS) on 24 January 2025. This new scheme has been brought as an alternative to the National Pension System (NPS) and will be implemented from 1 April 2025. UPS will be applicable exclusively for government employees, who are already registered under NPS. Employees will get the option to choose either NPS or UPS.
What is Unified Pension Scheme (UPS)?
Under the Unified Pension Scheme, central employees will get a fixed pension, which will be 50% of their average basic salary of the last 12 months. At least 25 years of service will be required to avail the benefits of this scheme.
If the employee dies, his family will get 60% of the basic pension.
Provision of minimum guaranteed pension has also been made, under which employees who work for 10 years will get a monthly pension of at least ₹ 10,000.
The pension will continue to increase according to the dearness allowance (DA), which will be decided on the basis of All India Consumer Price Index for Industrial Workers (AICPI-W).
A lump sum amount will also be provided at the time of retirement.
Who will get the benefit of this scheme?
The Unified Pension Scheme will be applicable only to central government employees, who are currently covered under NPS and opt for UPS.
If an employee chooses UPS, he will not be entitled to any other pension scheme, financial benefit, or policy change.
According to estimates, about 23 lakh employees will benefit from this scheme.
How much will the government contribute?
Currently, under NPS, employees contribute 10% of their basic salary, while the government contributes 14%.
After the implementation of UPS, the government’s contribution will be increased to 18.5%.
This will put an additional burden of about ₹6,250 crore on the government treasury in the first year.
Why was the Unified Pension Scheme introduced?
In view of the continuous demand and protest of the employees regarding the Old Pension Scheme (OPS), the government decided to implement this new pension scheme.
In OPS, retired employees were given 50% of the last salary as pension, but there was no guaranteed pension in NPS.
Under UPS, an attempt has been made to create a balance between NPS and OPS.