Unified Pension Scheme Explained In 6 Simple Points

The centre on Saturday approved the Unified Pension Scheme (UPS) for central government employees which is expected to impact 23 lakh employees, aimed at providing financial security and stability for government workers post-retirement.

What are some key features of the UPS? 

Assured Pension:

Employees who have served for a minimum of 25 years will receive an assured pension amounting to 50 per cent of their average basic pay over the last 12 months prior to retirement. For those with less than 25 years of service, the pension will be proportionate to their tenure, with the minimum qualifying service period set at 10 years.

Assured Family Pension:

In the unfortunate event of an employee’s demise, their spouse will receive a family pension, assured at 60% of the pension that the employee was drawing before their death.

Assured Minimum Pension:

Even for employees who have completed a minimum of 10 years of service, there is a guaranteed minimum pension of Rs 10,000 per month upon retirement.

Inflation Indexation:

Both the assured pension and the family pension are subject to inflation indexation. This adjustment ensures that the pensions keep pace with inflation.

Dearness Relief:

Similar to serving employees, retirees under the UPS will receive Dearness Relief based on the All India Consumer Price Index for Industrial Workers (AICPI-IW). 

Lump Sum Payment on Superannuation:

In addition to gratuity, employees will receive a lump sum payment at the time of superannuation. This payment will be 1/10th of the employee’s monthly emoluments (including pay and Dearness Allowance) as on the date of retirement, for every completed six months of service. This lump sum payment will not reduce the quantum of the assured pension.

“We are proud of the hard work of all government employees who contribute significantly to national progress. The Unified Pension Scheme ensures dignity and financial security for government employees, aligning with our commitment to their well-being and a secure future,” Prime Minister Narendra Modi said in a post on X. 

The UPS is set to benefit 23 lakh central government employees immediately. However, this number could increase to 90 lakhs if state governments opt to join the scheme https://t.co/BRwA6gOXYr

Explaining Key Features⤵️ pic.twitter.com/iu4iajnZ2N

— NDTV (@ndtv) August 25, 2024

The UPS is set to benefit 23 lakh central government employees immediately. However, this number could increase to 90 lakh if state governments opt to join the scheme, extending its benefits to a larger pool of government employees across India.

The announcement came against the backdrop of several non-BJP states deciding to revert to the DA-linked Old Pension Scheme (OPS) and employee organisations in some other states raising demand for the same.

The National Pension Scheme (NPS) has been implemented for all government employees except those in the armed forces joining the central government on or after January 1, 2004.

Most state/Union Territory governments have also notified NPS of their new employees.

Under the OPS, retired government employees received 50 per cent of their last drawn salary as monthly pensions. The amount keeps increasing with the hike in the DA rates. OPS is not fiscally sustainable as it is not contributory, and the burden on the exchequer keeps mounting.