NEW DELHI: In a landmark decision, the Union Cabinet has approved the Unified Pension Scheme (UPS), marking a significant overhaul of India’s pension system. Scheduled to take effect on April 1, 2025, this initiative is designed to address growing dissatisfaction with the existing New Pension Scheme (NPS) and provide government employees with more stable and predictable retirement benefits.
Key Features of the Unified Pension Scheme
The UPS guarantees a fixed pension amount, providing retirees with 50% of their average basic pay from the last 12 months before retirement for those who have completed at least 25 years of service. Employees with shorter service periods of 10 years or more will receive a proportionate pension. Additionally, the scheme ensures a minimum pension of ₹10,000 per month for those retiring after 10 years of service and provides a family pension of 60% of the last drawn pension in case of the retiree’s death.
To protect against inflation, pensions will be adjusted according to the All India Consumer Price Index for Industrial Workers (AICPI-IW). Retirees will also receive a lump-sum payment calculated as 1/10th of their monthly emoluments (including pay plus dearness allowance) for every six months of completed service, alongside the standard gratuity.
Broad Impact of the UPS
The introduction of the UPS is expected to benefit approximately 23 lakh central government employees. If state governments choose to adopt this scheme, it could extend its reach to over 90 lakh employees across the country, enhancing the financial well-being of a significant portion of the workforce.
Additionally, past retirees under the NPS will also benefit from the UPS, with arrears paid at Public Provident Fund (PPF) rates. Employees currently enrolled in the NPS will have the option to switch to the UPS, with the government increasing its contribution to the scheme from 14% to 18.5%, all without increasing employee contributions.
Context of the Reform: From NPS to UPS
The introduction of the UPS is a direct response to the criticisms surrounding the NPS, which was launched in 2004 as a reform to replace the Old Pension Scheme (OPS). The OPS provided guaranteed pensions but became financially unsustainable due to increasing liabilities. In contrast, the NPS was a funded scheme requiring contributions from both employees and the government, but it lacked assured returns, leading to widespread dissatisfaction.
Political considerations also play a crucial role in this reform. Opposition parties have seized upon the discontent with the NPS, prompting several states to revert to the OPS. The UPS is seen as a strategic move by the central government to gain support ahead of crucial assembly elections in regions such as Jammu & Kashmir, Haryana, Maharashtra, and Jharkhand.
Read more: Maharashtra Gov. approves Unified Pension Scheme for its employees
The approval of the Unified Pension Scheme represents a pivotal shift in India’s approach to retirement benefits for government employees. By offering guaranteed pensions, family benefits, and inflation adjustments, the UPS aims to enhance financial security for retirees and their families. As implementation approaches, the scheme’s reception will likely play a significant role in shaping the political landscape and the future of pension policies in India.
Important Links: In case if you want to read this guide in Hindi and Marathi then click on the below links.
| Language | Link |
| English | Unified Pension Scheme (UPS) Guide in English |
| Hindi | Unified Pension Scheme (UPS) Guide in Hindi |
| Marathi | Unified Pension Scheme (UPS) Guide in Marathi |