The Central Government has recently notified the Unified Pension Scheme (UPS), of a significant upgrade for government employees covered under the National Pension System (NPS). Starting April 1, 2025, this scheme ensures guaranteed retirement benefits, providing financial security and peace of mind. Here’s everything you need to know about the Unified Pension Scheme.
What is the Unified Pension Scheme?
The Unified Pension Scheme (UPS), announced by the Central Government, is designed to ensure stability and financial security for government employees post-retirement.
It replaces the uncertainty of retirement planning with guaranteed benefits, safeguarding the well-being and future of retirees.
Currently, employees under the National Pension System (NPS) have the option to transition to UPS, with the caveat that this decision, once made, is irrevocable.
Additionally, state governments have the flexibility to adopt the UPS for their employees, and Maharashtra has led the way by implementing the scheme on August 25, 2024. Unified Pension Benefits Explained.
1. Assured Monthly Payout:
Employees completing 25 or more years of service will receive 50% of their average basic pay over the last 12 months.
For employees with less than 25 years of service but more than 10 years, a minimum pension of ₹10,000 per month is guaranteed.
2. Proportional Payout for Voluntary Retirees:
Those opting for voluntary retirement after completing at least 25 years of service will start receiving the assured payout from the notional retirement date.
3. Family Pension and Inflation Adjustment:
Family pension equivalent to 60% of the employee’s pension is provided in the event of their demise.
Regular inflation-based adjustments via dearness relief, linked to the All-India Consumer Price Index for Industrial Workers (AICPI-IW), ensure pensions keep pace with the rising cost of living.
4. Lump-Sum Benefits
At the time of superannuation, employees will receive a lump-sum payment equivalent to 1/10th of their monthly salary (including pay and dearness allowance) for every six months of completed service.
This payment includes gratuity benefits and does not affect the pension amount.
Investment and Contributions
The Unified Pension Scheme introduces a dual-fund structure called Individual corpus and pool corpus.
Individual Corpus:
Funded by a 10% employee contribution (basic pay + Dearness Allowance). Matched by an equivalent 10% government contribution.
Pool Corpus:
Funded by an additional government contribution of approximately 8.5% of (basic pay + Dearness Allowance).
Investment Choices:
Employees can select from a range of investment options for their corpus. If no choice is made, a default investment option determined by the Pension Fund Regulatory and Development Authority (PFRDA) will apply.
Calculation of Payouts
The scheme offers three types of payout calculations based on years of service:
Full Assured Payout:
For employees with 25 or more years of service.
Assured pension of 50% of the average basic pay.
Proportional Payout:
For employees with less than 25 years of service.
Adjusted payout is proportional to their service period.
Minimum Guaranteed Pension:
This is for employees with at least 10 years of service.
Minimum payout of ₹10,000 per month.
Why UPS is an Improvement Over NPS
Guaranteed Returns: Unlike NPS, which depends on market performance, UPS guarantees a 50% payout of the 12-month average basic pay.
Inflation Adjustment: Keeps pensions aligned with economic conditions.
Comprehensive Coverage: Offers a robust mix of individual and pooled contributions to secure long-term financial stability.
Conclusion
The Unified Pension Scheme is a significant step forward in securing the future of central government employees. With guaranteed payouts, inflation adjustments, and additional benefits, the UPS sets a new benchmark in retirement security.
Courtesy ... Kashly Blog
N N MUJAWAR Sivaji Vasireddy
GS NUPE SG FNPO
