Unified Pension Scheme to Start from April 2025: Key Details for Central Employees

From April 1, 2025, the government will introduce the Unified Pension Scheme (UPS) as part of the National Pension System (NPS). This new pension framework will provide central government employees an option to ensure a minimum guaranteed pension, addressing long-standing demands for better retirement security.

This scheme, approved by the Union Cabinet in August 2024, will benefit around 23 lakh central employees. Here’s everything you need to know about its conditions, contributions, and eligibility.

What is the Unified Pension Scheme?

The Unified Pension Scheme is an extension of the NPS, designed to offer a guaranteed pension to central government employees. Under this scheme:

• Eligible employees will receive a minimum guaranteed pension of Rs 10,000 per month, even with shorter service periods.
• For those with longer service (25+ years), the pension can go up to 50% of the last 12 months’ average basic pay before retirement.

The scheme aims to provide financial security post-retirement while retaining some of the flexibility of the NPS framework.

Eligibility for Unified Pension Scheme

The UPS will be available to central government employees covered under the NPS who choose to opt into this scheme. However, there are specific eligibility criteria:

1. Minimum Service Requirement:

1. Employees must complete at least 10 years of service to qualify for the pension benefits.
2. Full assured payments will require a minimum of 25 years of service.
3. Exclusions:

2. Employees dismissed, removed, or who resign from service will not be eligible.
3. Those retiring prematurely under disciplinary actions or penalties will also be excluded.
4. Voluntary Retirement:
5. Employees taking voluntary retirement after 25 years of service will receive pensions starting from their notional retirement date.
6. Special Cases:
7. For employees retired by the government under FR 56(J) (not as a penalty), the pension will begin 25 years from the retirement date, provided they meet the service conditions.

Contribution Structure

The contribution system under the UPS closely follows the existing NPS framework:

• Employee Contribution: 10% of the basic salary.
• Government Contribution: 18.5% of the basic salary.
• Total Contribution: 28.5% of the basic salary.

This higher government contribution aims to provide enhanced retirement benefits compared to the regular NPS.

How the Pension Amount is Calculated?

The guaranteed pension under the UPS is calculated based on the last 12 months’ average basic pay.

• Employees with at least 25 years of service will receive a full assured pension equivalent to 50% of their average basic salary.
• For employees with shorter service periods (minimum 10 years), the pension will be provided on a proportional basis.

For instance:

• A central employee with a basic salary of Rs 60,000 and 25+ years of service will receive a pension of Rs 30,000 per month.
• If the service is shorter than 25 years, the amount will be adjusted proportionally, but the minimum pension of Rs 10,000 per month is guaranteed.

Key Highlights of the Unified Pension Scheme

1. Guaranteed Minimum Pension:
   Even employees with shorter service (10–24 years) will receive at least Rs 10,000 per month post-retirement.
2. Higher Government Contribution:
   The government’s contribution of 18.5% is significantly higher than the employee’s 10%, ensuring better retirement benefits.
3. Support for Voluntary Retirement:
   Employees opting for voluntary retirement after 25 years of service will receive assured payments starting from their notional retirement date.
4. Proportional Payments for Shorter Service:
   Employees with service periods shorter than 25 years will receive pensions proportionally, ensuring fairness.
5. No Pension for Certain Cases:
   Employees dismissed, removed, or who resign will not be eligible for UPS benefits.

Impact on Central Employees

The UPS is a significant step forward for central government employees, especially those looking for better retirement benefits than what the NPS currently offers.

1. Improved Financial Security:
   The scheme provides a sense of stability with guaranteed pension payouts, especially for employees nearing retirement.
2. Greater Government Support:
   The 18.5% government contribution ensures that employees can save more for their retirement.
3. Flexibility with Options:
   Employees have the choice to opt into the UPS, making it a customizable addition to their retirement planning.
4. Addresses Employee Union Demands:
   By guaranteeing 50% of the basic salary as a pension, the government has addressed one of the key demands of employee unions.

Notification and Implementation

The notification for the Unified Pension Scheme has already been issued. The scheme will officially be implemented from April 1, 2025, providing sufficient time for central employees to understand its framework and make informed decisions.

The UPS is not a replacement for the existing NPS but an additional option that employees can voluntarily choose based on their retirement planning needs.

For central government employees, this is an opportunity to secure a stable income post-retirement while benefiting from the flexibility and features of the NPS.