Unified Pension Scheme notified for central govt employees: What it offers

Policy will come into effect from April 1 and is expected to benefit over 2.3 million central government employees

The Finance Ministry has notified an option under the National Pension System (NPS) for central government employees who joined on or after January 1, 2004.

 

“The Unified Pension Scheme shall apply to central government employees who are covered under the National Pension System and who choose this option under the National Pension System,” according to a ministry statement.

 

“Pension Fund Regulatory and Development Authority (PFRDA) may issue regulations for operationalising the UPS. The effective date for operationalisation of the Unified Pension Scheme shall be April 1, 2025,” it said.

 

How does the Unified Pension Scheme work?

 

The union cabinet in August last year approved a new pension policy for nearly 2.3 million central government employees. According to it, government employees will contribute 10 per cent of their basic salary plus dearness allowance, while the government will contribute 18.5 per cent. Additionally, there’s a separate pooled corpus funded by an extra 8.5 per cent from the government. The UPS guarantees you a pension equivalent to 50 per cent of your average basic salary from the last 12 months.

 

Key features

 

Guaranteed pension: Employees will secure 50 per cent of their average basic pay from the last 12 months before retirement.

 

Dearness relief: Regular pension hikes to align with inflation trends.

 

Family pension: In case of the employee's death, family members are entitled to 60 per cent of the pension.

 

Superannuation benefits: A lump sum payout is provided alongside gratuity upon retirement.

 

Minimum pension: Employees with at least 10 years of service will receive a minimum of Rs 10,000 per month.

 

Voluntary retirement with 25 years of service:

 

Employees who opt for voluntary retirement after completing a minimum of 25 years of service will be eligible. In such cases, the payout will begin from the date the employee would have attained the superannuation age if they had continued working.

 

Current and future central government employees enrolled in the National Pension Scheme (NPS) have the option to either transition to the Unified Pension Scheme (UPS) or remain with the existing NPS. However, once the decision to switch to the UPS is made, it becomes final and cannot be reversed.

 

Transition and operationalisation

 

To ensure guaranteed payouts, employees are required to transfer their NPS corpus to the UPS.

 

If the employee's corpus is below the benchmark amount, they can contribute the difference to meet the required corpus for full payouts.

 

Any excess corpus beyond the benchmark amount will be refunded to the employee.