What is Unified Pension Scheme? Here's what you should know

The Union Cabinet led by Prime Minister Narendra Modi announced a Unified Pension Scheme (UPS) on Saturday (Aug 24), which aims to increase the retirement benefits for 23 lakh central government employees.

The UPS has certain elements of both the Old Pension Scheme (OPS) and the current National Pension Scheme (NPS) that will benefit the employees. The scheme will be effective from April 1, 2025, and will include assured pensions, family pensions, and minimum pensions to provide financial security for government workers after retirement.

Central government employees will be given the option to choose between UPS and NPS. Employees who are already NPS subscribers will be given an option to switch to UPS.

Key features of the Unified Pension Scheme

Assured pension

Employees who subscribe to the UPS with at least 25 years of service will get an assured pension of 50% of their average basic pay over the last 12 months before retirement. Other employees having a minimum of 10 years of service will be eligible for a pension proportionate to their tenure.

Assured family pension

UPS provides an assured family pension after their demise, according to which the employee's spouse will be given 60% of the pension drawn before their death.

Assured minimum pension

Employees who retire before completing 25 years of their service will be assured a minimum pension of Rs 10,000 monthly after retirement with a minimum of 10 years of service.

Inflation indexation

For the subscribers of UPS, the assured pension, family pension and minimum pension will be indexed to inflation.

Dearness Relief

Both serving and retired employees under the UPS will get Dearness Relief based on the All India Consumer Price Index for Industrial Workers (AICPI-IW).

Lump sum payment on superannuation

Apart from the assured pension, subscribers of UPS will also receive a lump sum payment on superannuation along with gratuity. This payment will amount to 1/10th of the employee's monthly emoluments, which includes pay and Dearness Allowance, as of the date of retirement for every completed six months of service.

(With inputs from agencies)