Prime Minister Narendra Modi-led Union Cabinet approved the Unified Pension Scheme (UPS) on Saturday, providing an assured pension of 50% of the average basic pay drawn over the last 12 months prior to superannuation for a minimum qualifying service of 25 years. With this, several questions have emerged regarding what this new scheme will bring to central government employees and how it differs from the National Pension System (NPS) or the Old Pension System (OPS).
Here are answers to all the possible questions surrounding the Unified Pension Scheme.
1. What is the Unified Pension Scheme (UPS)?
The Unified Pension Scheme (UPS) is a newly introduced pension scheme by the Central Government that assures a stable pension for government employees based on their service duration and last drawn basic pay.
2. How is the pension calculated under UPS?
Assured Pension: Employees will receive 50% of their average basic pay drawn over the last 12 months before retirement. This applies to those with at least 25 years of qualifying service. For those with less than 25 years but more than 10 years of service, the pension is proportionately reduced.
Assured Minimum Pension: A minimum pension of ₹10,000 per month is guaranteed for employees who retire after a minimum of 10 years of service.
3. What happens to the family pension if the employee passes away?
The family of the deceased employee will receive 60% of the pension that the employee was receiving immediately before their death.
4. How does the UPS address inflation?
Inflation Indexation: The assured pension, family pension, and minimum pension will all be indexed to inflation. Dearness Relief (DR) will be provided based on the All India Consumer Price Index for Industrial Workers (AICPI-IW), similar to what is given to serving employees.
5. Are there any additional payments at the time of retirement?
Yes, in addition to gratuity, employees will receive a lump-sum payment at the time of superannuation. This payment will be 1/10th of the monthly emolument (basic pay + DA) for every completed six months of service. This lump-sum payment does not reduce the assured pension amount.
6. Who is eligible for UPS?
The UPS is available to all Central Government employees and can also be adopted by State Governments. It benefits approximately 23 lakh Central Government employees and could potentially benefit over 90 lakh State Government employees currently under the National Pension Scheme (NPS).
7. Can existing NPS employees switch to UPS?
Yes, existing NPS employees, as well as future employees, have the option to switch to UPS. However, once the choice is made, it is final.
8. Will the employee's contribution increase under UPS?
No, the employee's contribution will not increase. However, the Government's contribution will rise from 14% to 18.5% to implement the UPS.
9. What provisions are made for past retirees under NPS?
Past retirees under NPS who have already superannuated will also be covered under UPS. They will receive arrears for the past period with interest at Public Provident Fund (PPF) rates.
10. When will the UPS be implemented?
The UPS is set to be implemented from April 1, 2025. The necessary support mechanisms, legal, regulatory, and accounting changes will be put in place by then.
11. Who is implementing the UPS?
The Central Government is implementing the UPS, and a similar framework has been designed for State Governments to adopt.
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