The Union Cabinet, led by Prime Minister Narendra Modi, approved Unified Pension Scheme (UPS) on Saturday, guaranteeing 50 per cent of the salary as assured pension for central government employees. This scheme will become effective on April 1, 2025. Currently, the government provides only the defined contribution-based National Pension System (NPS) for government employees, where employees contribute 10 per cent of their salary, and the government contributes 14 per cent.

The newly approved Unified Pension Scheme (UPS) assures around 23 lakh government employees a defined benefit upon retirement. Under this scheme, employees will receive 50 per cent of their average basic salary over the last 12 months as a pension after retirement.

The scheme is optional, allowing employees to choose between the NPS and the UPS for their pension. It is available not only to new subscribers but also to existing NPS subscribers who prefer an assured pension.

Also Read: When Can Pensioners Avoid The TDS Burden? What You Need To Know

Key Points:

• The 50 per cent assured pension will be applicable only if an employee has completed 25 years of service.
• Proportionate pensions will be available for shorter service periods, with a minimum of 10 years of service.
• An assured family pension, amounting to 60 per cent of the employee’s pension, will be provided in case of the employee’s death.
• A minimum assured pension of Rs 10,000 per month will be provided upon superannuation after at least 10 years of service.
• The UPS includes an inflation indexation provision, applicable to the assured pension, assured family pension, and assured minimum pension. The indexation will be based on the Dearness Relief tied to the All India Consumer Price Index for Industrial Workers (AICPI-W).
• In addition to the pension and gratuity, the UPS will provide a lump-sum payment of ‘1/10th of the monthly emolument (pay + DA) as on the date of superannuation for every completed six months of service’. The assured pension amount will not be reduced by this payment.
• The government’s contribution will increase from 14 per cent to 18.5 per cent.
• The scheme will apply retroactively to those who have already retired under NPS after its implementation in 2004, as well as those retiring by March 31, 2025. This includes the provision for arrears where necessary.