The Unified Pension Scheme (UPS) is one of the major reforms in the Indian pension system to ensure a defined and assured retirement income to central government employees: a proposal that the Union Cabinet approved on August 24, 2024, and which goes into effect on April 1, 2025. The scheme has added some major features that would boost the financial security of government employees.
Key Features of the Unified Pension Scheme
- Guaranteed Pension Benefits: A minimum of 25 years of service would earned an employee a retirement pension at an amount of 50% of the average basic pay drawn during the last 12 months preceding retirement. The eventual outcome of a service between 10 to 25 years will be prorata. However, a minimum assured pension of ₹10,000/month will be there for people who have served for at least 10 years.
- Family Pension Scheme: The bespoken family pension will be for the employee in case of death of the employee and their continued financial support dependence.
- Inflation-linked : Pension amounts under UPS would periodically increase through dearness relief, as per Consumers Price Index All India for Industrial Workers (AICPI-W) for purpose of offsetting inflation.
- With One-time Cash Benefits on Retirement: Apart from the pension, retirement would have a one-time cash payment computed as onetenth of their monthly emoluments (pay plus Dearness Allowance) for every completed six months of service, supplementing their financial corpus at retirement.
Eligibility And Enrollment
The UPS applies to all central government employees under-age and current members of the National Pension System (NPS)
- Current Employees: Servants in continuity with April 1, 2025, would have the option to convert from NPS Membership to UPS Membership.
- New Hires: Employees who enter central government service on or after April 1, 2025, will have the option of joining UPS and will not have NPS membership upon entry.
- Retired Employees: Employees under NPS who retire on or before March 31, 2025 can also avail of the benefit under UPS since the scheme is meant to cover those who have recently retired.
Membership or claim forms are all available online through the Protean CRA portal. It’s meant to make it easier for eligible employees to join the scheme.
Financial Implications and Contribution by Government to Scheme
An employee would continue to contribute at the rate of 10 percent of his basic pay and Dearness Allowance under the UPS. The increase in the government’s outgo from 14% to 18.5% as contribution to the scheme is indicative of an internal commitment towards the sustainability of the scheme and financial wellbeing of its employees.
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