The government has announced a new Unified Pension Scheme (UPS) for central government employees, replacing the current Shared Pension Scheme (CPS).
The Central Government greatly respects all government employees who work for the country’s development. The UPS Scheme has been introduced to provide financial security to all of them so that they can live with more dignity.
This scheme has been brought to avoid any trouble after retirement. This decision was taken to ensure their future.
The Central Government has already clarified that this scheme is an alternative to the National Pension System.
All NPS employees have the flexibility to shift to UPS. The government has also promised to provide family pensions starting next financial year.
Under the new scheme, employees with at least 25 years of service will receive 50 percent of their salary as a pension, while those with less service will receive a percentage based on their years of service.
Employees must have at least 10 years of service to qualify for the minimum pension. The new scheme will apply to 23 lakh employees who are part of the National Pension System (NPS) as part of the Contributory Pension Scheme. Currently, NPS applies to employees who joined after April 1, 2004, and all of them will come under the UPS.
The Union Cabinet has approved the UPS policy, which will come into effect on April 1, 2025. The scheme allows NPS subscribers to migrate to UPS and is expected to benefit 23 lakh central government employees. If state governments also join, an additional 90 lakh people will benefit.
Under UPS, the pension calculation is based on the average basic pay received in the 12 months preceding retirement. A minimum pension of Rs. 10,000 is provided, and the pensioner’s spouse will receive 60% of the pension on the pensioner’s death.
In addition to the pension details, calculating the inflation index and other benefits, such as the lump sum payment on the day of retirement, are also explained.
The government has assured that opting for the new UPS will not burden employees, as the current 10% subscription will remain payable. However, the government’s share will increase from 14.5 percent to 18 percent, increasing costs.
It is estimated that the government will need to pay an additional Rs. 800 crore to settle UPS dues for retired people, and Rs. 6,250 crore by increasing its share.
The Unified Pension Scheme (UPS) will also apply to employees who have already retired or will retire by March 31, 2025, including paying any outstanding dues. If state governments choose to join UPS, they must bear the additional financial burden.
UPS Key Features
- Assured Pension: 50 % of the average basic pay drawn over the last 12 months before superannuation for a minimum qualifying service of 25 years.
- Proportionate for a lesser service period upto a minimum of 10 years of service.
- Assured Family Pension: @ 60% of employee pension immediately before her/his demise.
- Assured Minimum Pension: @ 10000 monthly on superannuation after a minimum of 10 years of service.
Inflation Indexation: On assured pension, on assured family pension, and assured minimum pension Dearness Relief based on All India Consumer Price Index for Industrial Workers (AICPI-IW) as in case of serving employees
- Lump-sum payment at superannuation in addition to gratuity.
- 1/10th of monthly emolument (pay + DA) as on the date of superannuation for every six months of service completed.
- This payment will not reduce the quantum of assured pension.