8th Pay Commission to DA hikes: 10 changes for central govt employees and pensioners in 2025

As we prepare to bid farewell to 2025 and step into 2026, it is a good time for Central Government employees and pensioners to reflect on the major policy changes that have shaped this year.

From pension reforms to tax updates and new digital conveniences, 2025 brought several impactful updates. Here is a simple recap of everything you need to know.

1) 8th CPC clarification

The 8th Central Pay Commission (CPC) was formally constituted, and its Terms of Reference (ToR) were notified in late 2025. Amid rising concern among Central Government pensioners over whether pensions would be excluded from the 8th Central Pay Commission (CPC), the Finance Ministry issued a clear reassurance on December 2, 2025. The government confirmed that the pension is not excluded from the scope of the 8th CPC.

2) Dearness Allowance (DA) and Dearness Relief (DR) hikes

In 2025, the government approved two DA/DR increases for central government employees and pensioners. A 2% hike effective January 1, 2025, raising DA/DR from 53% to 55%. A 3% hike effective July 1, 2025, raising DA/DR from 55% to 58%

3) Unified Pension Scheme (UPS) introduced

Effective April 1, 2025, UPS introduced a more structured and predictable pension framework. UPS offers an assured pension based on the average last pay, while employees contribute a portion of their salary along with government contributions.

4) UPS–NPS one-time switch

In 2025, the government introduced a one-time, one-way switch allowing employees who opted for NPS to switch to UPS. This flexibility is subject to conditions but provides employees more control over their retirement planning.

5) Digital Life Certificate (DLC)

The 2025 DLC reforms make life certificate submission easier than ever. The government now prioritises Face Authentication, allowing pensioners to use just their Aadhaar-linked smartphone.

6) Life Certificate for NRIs

7) Life certificate requirement for family pension

A new rule now requires both parents to submit life certificates to continue receiving the enhanced rate of family pension. Previously, there was no such requirement, leading to unintentional overpayments even after the death of one parent.

The clarified rule ensures accurate pension disbursal and prevents overpayment.

8) NPS & UPS investment options expanded

9) PFRDA allows up to 75% equity allocation

With these additions, Central Government employees now have six investment options under NPS and UPS.

10) New tax regime

Under the new tax regime, Central Government pensioners, employees are exempt from a total income of ₹12 lakh, comprising interest income and pension.