Over 23 lakh govt employees under NPS can choose UPS

NEW DELHI: The Indian government is set to implement the Unified Pension Scheme (UPS) from April 1, 2025, bringing substantial benefits to around 23 lakh central government employees. The new pension system, expected to be a game-changer in employee welfare, is designed to ensure financial security post-retirement, offering a structured and predictable pension to government employees.

One of the most significant features of the UPS is the assured pension, which guarantees that employees with a minimum of 25 years of service will receive 50 per cent of the average basic salary of the last 12 months before retirement. The pension amount will be proportional for those with at least 10 years of service. Moreover, the scheme ensures a minimum pension of Rs 10,000 per month for those who retire after at least 10 years of service, providing a safety net for lower-income employees.

In addition to the assured pension, the UPS also includes a guaranteed family pension. In the event of an employee’s death, the family will receive 60 per cent of the employee’s pension. This provision aims to offer financial stability to the families of deceased employees, ensuring they are not left without support.

The government has also committed to adjusting pensions, family pensions, and minimum pensions in line with inflation. These adjustments will be based on the All India Consumer Price Index for Industrial Workers (AICPI-IW), similar to the dearness allowance adjustments currently given to serving employees.

Another notable aspect of the UPS is that employees’ contributions will not increase under the new scheme. Instead, the government will step up its contribution from the current 14 to 18.5 per cent. This additional government contribution is a significant enhancement, aimed at boosting the overall pension corpus for employees.

The UPS will also provide a lump-sum payment upon retirement, in addition to gratuity. This payment will be equivalent to one-tenth of the employee’s monthly remuneration (salary plus dearness allowance) for every six months of completed service. Importantly, this lump sum will not reduce the amount of the assured pension, ensuring that employees receive the full benefits they are entitled to.

The implementation of the UPS is not limited to current employees. It will also apply to those who have already retired under the National Pension System (NPS). Retirees will receive outstanding dues for the past period, with interest calculated at Public Provident Fund (PPF) rates, ensuring that they are compensated fairly.

Employees will have the option to choose between the NPS and the UPS. Once a decision is made, the choice will be final. The government is making the UPS available as an alternative, offering employees flexibility in deciding their retirement plans.

The central government has laid out a robust support mechanism and is making necessary legal, regulatory, and accounting changes to ensure the smooth implementation of the UPS. This scheme is poised to benefit not only central government employees but could also extend to over 90 lakh state government employees if state governments decide to adopt a similar structure. Currently, these employees are under the NPS.