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(THE GIST OF PIB) Unified Pension Scheme

(JANUARY-2025)

The Union Finance Ministry recently notified operationalisation of the Unified Pension Scheme (UPS) as an option under the National Pension System (NPS) for central government employees.

UPS will apply to Central Government employees who are covered under the National Pension System (NPS) and who choose this option under the NPS.
Both current and future Central Government employees covered under the NPS have the option to choose between the UPS or continue with the existing NPS plan.
Once a decision is made to switch to the UPS, it is considered final and binding.
Pension Fund Regulatory and Development Authority (PFRDA) may issue regulations for operationalizing the UPS.
The effective date for operationalization of the Unified Pension Scheme shall be April 1, 2025.

UPS provides a guaranteed payout to employees upon superannuation.
It will offer 50% of the average basic pay drawn by a Central government employee during the 12 months prior to retirement, provided they complete 25 years of service.
Employees with less than 25 years of service but more than 10 years will receive a pension on a proportionate basis.
A minimum payout of Rs 10,000 per month is assured for employees with 10 or more years of qualifying service.
For those who choose to retire voluntarily after 25 years of service, the payout will begin from the date they would have reached superannuation if they had continued working.
In the event of the payout holder's death after superannuation, a family payout at 60% of the payout admissible to the holder will be given to the legally wedded spouse.
Additionally, dearness relief will be available on the assured payout and family payout. Dearness relief will be worked out in the same manner as Dearness Allowance applicable to serving employees.
UPS or assured payout would not be available in case of removal or dismissal from service or resignation of the employee.

Unlike the old pension scheme, UPS is contributory in nature, wherein employees will be required to contribute 10 percent of their basic salary and dearness allowance while the employer's contribution (the central government) will be 18.5 percent.
However, the eventual payout depends on the market returns on that corpus, mostly invested in government debt.