Unified Pension Scheme: Check key benefits, assured pension details and more

The central government has introduced the Unified Pension Scheme (UPS), aimed at providing an assured pension, family pension, and a guaranteed minimum pension for government employees.

The UPS, set to take effect from April 1, 2025, promises enhanced financial security by offering a pension equivalent to 50% of the average basic pay drawn over the last 12 months for those with at least 25 years of service.

Additionally, it ensures a family pension at 60% of the employee’s pension and guarantees a minimum pension of Rs 10,000 per month.

The scheme also includes inflation-linked increases based on the All India Consumer Price Index for Industrial Workers (AICPI-IW), further safeguarding retirees against rising costs.

Now, let’s break down how the scheme works and its benefits in detail:

What is the Unified Pension Scheme (UPS)?

The UPS is a new pension policy for government employees that guarantees:

An assured pension based on the employee’s average basic pay.

A family pension to support the employee’s dependents in case of death.

A minimum pension to ensure no retired employee receives less than Rs 10,000 per month.

When does it start?

The UPS will come into effect on April 1, 2025.

What are the key benefits?

Employees who have completed at least 25 years of service will get a pension equal to 50% of their average basic pay over the last 12 months before retiring.

For those under 25 years of service, the pension will be proportionate to the years served, with a minimum of 10 years of service required for eligibility.

Assured family pension: In case of an employee’s death, their family will receive a pension worth 60% of their last drawn pension.

Assured minimum pension: Retired employees with at least 10 years of service will receive a minimum pension of Rs 10,000 per month, regardless of their earnings during service.

Lump-sum payment: In addition to the pension, employees will receive a lump-sum payment at retirement.

This will be calculated as 1/10th of their last drawn monthly pay (including DA) for every six months of service completed. This lump sum will not reduce the amount of assured pension.

Inflation protection: The pension will be indexed to inflation, ensuring it rises with the cost of living, similar to how serving employees’ pay increases with inflation (Dearness Relief).

What about past retirees?

Past retirees who were under the National Pension System (NPS) will have the option to switch to UPS. They will also receive arrears with interest, calculated at Public Provident Fund (PPF) rates

Contribution structure: Employee contributions will remain the same under the UPS. The government’s contribution will increase from 14% to 18.5%, ensuring stronger support for employees.

Who benefits

Approximately 23 lakh central government employees will benefit from this scheme. State governments are also encouraged to adopt UPS, which could extend the benefits to over 90 lakh employees currently under NPS.

To sum up, the Unified Pension Scheme or UPS is designed to offer better financial security to government employees by guaranteeing fixed pensions and family pensions, all while protecting against inflation.

With UPS, employees can look forward to a dignified and stable retirement.

This new scheme offers employees a choice between continuing with NPS or switching to UPS, but the choice, once made, will be final.

The government will provide all necessary support to implement this scheme by 2025.