Unified Pension Scheme: UPS Key Features and Benefits for Employees

The Unified Pension Scheme (UPS) is a new pension scheme for Central Government employees introduced by the Government of India.

This scheme offers a fixed pension after retirement, providing employees with a sense of security and stability in their post-retirement years.

With the introduction of the Unified Pension Scheme (UPS), employees now have the flexibility to choose their retirement benefits.

Based on their preferences and future financial planning, they can opt for either the National Pension System (NPS) or the Unified Pension Scheme (UPS), provided they contribute to NPS before retirement and follow all the rules.

Before implementing the new scheme, the ‘Old Pension Scheme’ (OPS) applied to Central Government employees who joined before December 31, 2003.

However, this scheme was abolished in 2004, and the NPS was implemented from January 1, 2004, for those who joined jobs from that date.

NPS requires employees to contribute 10 percent of basic pay + DA, and the government deposits 14 percent of the employee’s salary into the fund.

The Unified Pension Scheme will be implemented on April 1, 2025, and will benefit approximately 23 lakh government employees expected to retire by March 31, 2025. Like OPS, the scheme will provide a monthly pension of 50% of the salary.

Under the Unified Pension Scheme, employees contribute 10 percent, while the Center’s contribution is re-evaluated every three years.

In summary, the Unified Pension Scheme (UPS), which will be implemented on April 1, 2025, provides central government employees with the option to receive a fixed pension after retirement.

Employees can benefit from either the National Pension System (NPS) or the Unified Pension Scheme (UPS).

Unified Pension Scheme (UPS)

The government of India is set to introduce the Unified Pension Scheme (UPS) for central government employees on April 1, 2025. This scheme, hailed as a more advantageous and secure pension alternative, outshines several key aspects of the existing National Pension System (NPS).

What is UPS?

The Unified Pension Scheme (UPS) is a new initiative designed to enhance the financial security of central government employees by providing a guaranteed pension upon retirement.

Eligibility for UPS:

The following central government employees currently enrolled in the NPS are eligible for UPS:

Those who have completed a minimum of 10 years of service.
Individuals who have voluntarily retired after completing 25 years of service.
Retired employees under FR 56(j) based on government decisions.

Ineligible Individuals:

Those who have voluntarily resigned from their position.
Employees who have been dismissed from service.

Benefits of UPS

Assured Pension:

Employees will receive 50% of their average basic pay for the 12 months before retirement as a pension.
A minimum pension of ₹10,000 is guaranteed for those with at least 10 years of service.
A prorated pension will be provided for those with less than 25 years of qualifying service.

Family Pension:

In the event of an employee’s death, their spouse will receive 60% of the employee’s pension. This applies only to the spouse present at the time of retirement.

Dearness Relief:

The dearness allowance percentage applicable to active employees will also apply to pensioners.

Lump-sum Payment:

Employees will receive a one-time payment of 10% of (basic pay + DA) at retirement, which does not affect their pension amount.

Pension Calculation Example

Salary: ₹45,000
For 25 years of service: ₹22,500 (50% of salary)
Minimum guaranteed pension: ₹10,000

Lump-sum Payment Details

Contribution Structure:

Employees will contribute 10% of their (basic salary + DA).
The Central Government will also contribute 10% of (basic salary + DA).

Additional Government Support:

UPS will provide an additional 8.5% contribution for selected employees.

Fund Management:

Employees can choose how to invest their corpus.
The Central Government will manage the pool corpus funds directly.

Investment Options

Employees have the option to choose investments for their fund. If no choice is made, a default investment strategy will be applied. The government solely determines the investment of the pool corpus.

Transfer and Withdrawal

Transfer from NPS: The NPS account balance of employees who opt for UPS will be transferred to the new UPS scheme.
Mandatory Transfer: To receive a pension, the individual’s corpus amount must be transferred to the pool corpus.

For Past Retirees

Past employees can also opt for the UPS scheme. Their dues will be paid at the Public Provident Fund (PPF) interest rate, and a monthly top-up facility will also be available.

Restrictions and Conditions

Once employees opt for UPS, they cannot revert to the NPS.
UPS participants cannot request new changes to the scheme.
Employees who choose UPS will not be eligible for future modifications in pension provisions.