Unified Pension Scheme introduced for Central Government employees

Amid the growing demand for the rollback of the Old Pension Scheme, the Union Cabinet, on Saturday approved the Unified Pension Scheme (UPS) for central government employees which is expected to impact 23 lakh employees, aimed at providing financial security and stability for government workers post-retirement.

The scheme will come into effect on April 1, 2025. With this, the government employees will be provided an assured pension following their retirement. Existing central government NPS subscribers will also be allowed to opt for the Unified Pension Scheme (UPS) to avail themselves of the assured pension scheme in place of the present NPS.

The state governments will also be given the option to opt for the Unified Pension Scheme. If state governments opt for UPS, then the number of beneficiaries will be around 90 lakh. According to the government, the expenditure for arrears will be Rs 800 crore. The annual cost increase will be around Rs 6,250 crore in the first year.

Key features of the Unified Pension Scheme

Assured Pension:

Government Employees who have served for a minimum of 25 years are eligible for an assured pension amounting to 50 per cent of their average basic pay over the last 12 months before retirement. The pension amount will be proportionate to the tenure of service to those employees with less than 25 years of service, with the minimum qualifying service period set at 10 years.

Assured Family Pension:

In the unfortunate event of an employee’s demise, the spouse of the deceased employee will receive a family pension, assured at 60% of the pension that the employee was drawing before their death.

Assured Minimum Pension:

For those employees who have completed a minimum of 10 years of service, there is a guaranteed minimum pension of ₹ 10,000 per month upon retirement.

Inflation Indexation:

The assured pension, family pension, and minimum pension will be indexed to inflation. This adjustment ensures that the pensions keep pace with inflation.

Dearness Relief:

Similar to serving employees, retirees under the UPS will receive Dearness Relief based on the All India Consumer Price Index for Industrial Workers (AICPI-IW).

Lump Sum Payment on Superannuation:

In addition to gratuity, employees will receive a lump sum payment at the time of superannuation. This payment will be 1/10th of the employee’s monthly emoluments (including pay and Dearness Allowance) as on the date of retirement, for every completed six months of service. This lump sum payment will not reduce the quantum of the assured pension.