In January 2025, the Ministry of Finance (MoF) notified the Unified Pension Scheme (UPS) as an option for central government employees who are already covered under the National Pension System (NPS). The scheme aims to offer retirees a guaranteed pension, ensuring financial security and dignity post-retirement.
- As per MoF, the Pension Fund Regulatory and Development Authority (PFRDA) will monitor UPS regulations and provide operational guidelines.
- The scheme will come into effect from April 01, 2025.
Background:
i.The UPS is an upgrade of the existing NPS, which was introduced on 1st January, 2004 by Atal Bihari Vajpayee government and has replaced the Old Pension Scheme (OPS).
- NPS was initially introduced for government employees. Later in 2009, it was expanded to cover all sectors.
ii.The UPS was recommended as an alternative scheme to address the concerns of government employees about NPS, by a high-level committee headed by T.V. Somanathan, Cabinet Secretary, in April 2023.
iii.In August 2024, the Union Cabinet led by Prime Minister (PM) Narendra Modi has approved the UPS for central government employees. The UPS combines the benefits of existing NPS and OPS.
About Unified Pension Scheme (UPS):
i.UPS is voluntary for existing employees under NPS and those opting for Voluntary Retirement Scheme (VRS) under NPS, to switch to UPS or not. But, once switch is made to UPS then, it cannot be reversed.
ii.The scheme is contributory in nature, wherein the central government employees will be required to contribute 10% of their basic salary and Dearness Allowance (DA).
- The central government has increased its contribution from 14% (currently under NPS) to 18.5%.
iii.The scheme is open for all state governments in India to adopt it in their respective states.
- Maharashtra was the 1st state, which has implemented UPS for its government employees with effective from March 2024.
Eligibility Criteria :
i.Superannuation: Employees who retire after completing at least 10 years of qualifying services, are eligible for an assured payout.
ii.Retirement under FR 56 (j): Employees who are retired by the Government of India (GoI) under the provision of Fundamental Rules (FR) 56 (j), which allows retirement in the public interest for efficiency, before the regular superannuation.
- The retirement under FR 56 (j) is not a penalty under the Central Civil Services (Classification, Control, and Appeal) Rules, 1965.
iii.Voluntary Retirement with minimum 25 years of service: Employees who take Voluntary Retirement (VR) after completing minimum 25 years of service are eligible for the scheme.
- However, in this case, the payout will start from the date the employee would have attained the age of superannuation, had they continued working.
Note: MoF has clarified that the assured pension will not be offered to employees who are dismissed, removed, or resign from service, in such cases; the UPS option will not be available.
Key Rules for Assured Pension under UPS:
i.Full Assured Pension: Under the UPS, all central government employees who have served for minimum 25 years, will receive 50% of their last drawn salary from the past 12 months before superannuation as pension.
ii.Proportionate Pension for shorter services: The pension will be proportionate for those with shorter service periods (less than 25 years) of qualifying service, based on their service time.
iii.Assured Pension for VR: For employees retiring voluntarily after completing 25 years of service, the assure payout/pension will start from the date they would have attained the age of superannuation (had they continued in service until official retirement).
iv.Assured family pension: The scheme has a provision of family pension, in case of an employee’s death. The family of the deceased employee will be eligible to receive 60% of the pension amount that employee was receiving immediately before his death.
- The pension will be provided to the legally wedded spouse of the deceased, according to the date of superannuation, VR or retirement under FR 56 (j).
v.Assured minimum pension: The scheme has a unique feature of assured minimum pension for those employees who have served for at least 10 years, will be entitled to receive a minimum pension benefit of Rs 10,000 per month on superannuation.
vi.Inflation Indexation: The assured pension, family pension, and minimum pension will be indexed to inflation. Also, UPS subscribers will be entitled to receive Dearness Relief (DR), based on the All India Consumer Price Index for Industrial Workers (AICPI-IW) as in the case of serving employees.
vii.Lumpsum payment at superannuation: Apart from gratuity, UPS subscribers will receive a lumpsum payment equivalent to 1/10th (10%) of their monthly emoluments (pay + DA) as of the retirement date for every completed 6 months of service.
- This payment will not affect or change the assured pension amount.
Recent Related News:
In December 2024, the Department of Revenue (DoR), Ministry of Finance (MoF) has notified that the Government of India (GoI) has withdrawn the Special Additional Excise Duty (SAED), commonly known as the Windfall tax, thereby eliminating levies on Aviation Turbine Fuel (ATF), crude oil, petrol, and diesel. This move, effective immediately, aims to enhance profitability in the oil sector, foster growth in the energy industry, and boost exports.
- Alongside, the Road and Infrastructure Cess (RIC) on petrol and diesel exports has also been removed.
