In a landmark decision, the Indian government has approved the Unified Pension Scheme (UPS), set to be implemented from April 1, 2025. This initiative aims to provide enhanced financial security to central government employees, ensuring a more predictable and assured pension post-retirement.
Key Features of the Unified Pension Scheme
1. Assured Pension Amount
Employees will receive 50% of their average basic pay drawn over the last 12 months prior to retirement as their pension. To qualify for this full pension, a minimum of 25 years of service is required. For those with service periods between 10 to 25 years, the pension will be proportionately adjusted.
2. Minimum Pension Guarantee
The scheme ensures a minimum pension of ₹10,000 per month for employees who have completed at least 10 years of service.
3. Family Pension Provision
In the unfortunate event of an employee’s demise, the surviving spouse or eligible family members will receive 60% of the employee’s pension as a family pension.
4. Inflation Protection
To safeguard against inflation, the UPS includes dearness relief based on the All India Consumer Price Index for Industrial Workers (AICPI-IW), similar to the adjustments made for serving employees. This ensures that the purchasing power of the pension remains consistent over time.
5. Lump-Sum Retirement Benefit
Beyond the regular pension and gratuity, retirees will receive a lump-sum payment calculated as one-tenth of their monthly emoluments (basic pay plus dearness allowance) for every completed six months of service. Importantly, this additional benefit does not reduce the assured pension amount.
Financial Implications and Contributions
To support the enhanced benefits under the UPS, the government’s contribution to the pension corpus will increase from the current 14% to 18.5% of the employee’s basic pay and dearness allowance. Employees’ contributions will remain unchanged at 10%. This adjustment is expected to incur an additional cost of approximately ₹6,250 crore in the first year of implementation.
Options for Current Employees and States
Existing central government employees enrolled under the National Pension System (NPS) will have the option to switch to the UPS. However, this choice is irrevocable once made. Additionally, state governments can adopt the UPS framework, potentially extending its benefits to around 90 lakh employees nationwide.
Impact on Retired Employees
Notably, the UPS provisions will also apply retrospectively to employees who retired under the NPS since its inception in 2004. These retirees will receive arrears with interest calculated at Public Provident Fund (PPF) rates for the past period, ensuring they too benefit from the enhanced pension structure.
Government’s Commitment to Employee Welfare
Prime Minister Narendra Modi emphasized the significance of the UPS, stating that it ensures dignity and financial security for government employees, reflecting the administration’s commitment to their well-being and a secure future.
Conclusion
The introduction of the Unified Pension Scheme marks a significant shift towards providing assured and enhanced pension benefits to government employees. With its comprehensive features addressing various aspects of post-retirement financial security, the UPS is poised to offer greater peace of mind to millions of public servants across the country.