Unified Pension Scheme (UPS) Introduced to Provide Assured Pension for Government Employees
The Finance Ministry, on January 24, 2025, notified the Unified Pension Scheme (UPS) as an option for workers covered under the National Pension System (NPS), to be implemented from April 1, 2025.
The NPS, initially known as the New Pension Scheme, did not provide an assured pension for government employees who joined service on or after January 1, 2004. It had replaced the earlier system that guaranteed pensions equal to 50% of the last drawn salary, which was deemed fiscally unsustainable.
The UPS, approved by the Union Cabinet on August 24 last year, reinstates the assurance of a pension equivalent to 50% of the last drawn salary for Union government employees, along with periodic dearness relief adjustments in line with inflation trends.
Additionally, it offers a family pension amounting to 60% of a government employee's pension in the event of their demise, along with a lump sum superannuation payout and gratuity benefits at the time of retirement. Moreover, a minimum pension of ₹10,000 per month has been assured for those who complete at least 10 years of Union government service.
The UPS was proposed as an alternative scheme to address concerns raised by government employees about the NPS. This recommendation was made by a high-level panel led by former Finance Secretary and current Cabinet Secretary T.V. Somanathan.
For NPS members who may have already retired before April 1, 2025, the notification stated that the Pension Fund Regulatory and Development Authority (PFRDA) will establish a system to address their cases.