Centre Notifies Unified Pension Scheme (UPS) for NPS Employees: Key Highlights
The Indian government has officially notified the much-anticipated Unified Pension Scheme (UPS), offering an assured pension for government employees covered under the National Pension System (NPS). This scheme will come into effect from April 1, 2025, and provides a secure retirement option for those seeking financial stability after years of service.
What is the Unified Pension Scheme (UPS)?
The Unified Pension Scheme, approved in August 2024, bridges the gap between the old pension scheme and the NPS by introducing the following features:
Guaranteed 50% of the last drawn salary as pension, along with dearness relief hikes to keep up with inflation.
A family pension equal to 60% of the government employee's pension after their demise.
A minimum assured pension of ₹10,000/month for employees with at least 10 years of service.
Lump-sum superannuation payout and gratuity benefits.
How Does UPS Work?
For employees opting for UPS, their retirement corpus will consist of two key funds:
Individual Corpus: Contributions made by the employee and the government (10% of basic pay + Dearness Allowance).
Pool Corpus: An additional fund created through 8.5% of basic pay + Dearness Allowance contributed by the government to cover assured payouts.
At retirement, employees opting for UPS will transfer their individual corpus into the pool fund. If the personal corpus is insufficient to meet the guaranteed pension, the pool corpus will cover the shortfall.
Options for Employees
Employees under the NPS can choose UPS for the assured benefits.
Those who do not opt for UPS will remain under the NPS, where pension incomes depend solely on accumulated investments without guarantees.
Key Considerations
Employees choosing UPS will not be eligible for future policy concessions, changes, or financial benefits beyond the scheme.
Retirees under NPS before April 1, 2025, can also opt for UPS, with a mechanism being developed by the Pension Fund Regulatory and Development Authority (PFRDA) for top-up amounts.
Why the Unified Pension Scheme?
The UPS addresses long-standing concerns of government employees who felt the NPS lacked financial security. It restores confidence with an assured pension model, resembling the older system but with fiscal sustainability through its pooled funding approach.
This move is expected to benefit thousands of government employees, ensuring a stable and secure retirement.
Reference from:-https://www.thehindu.com/news/national/centre-finally-notifies-unified-pension-scheme-option-for-government-staff-covered-by-nps/article69140183.ece