The Central Government introduced the Unified Pension Scheme (UPS) on 24 August 2024. The UPS scheme will be implemented from 1 April 2025 and is expected to benefit 23 lakh Central Government employees. Find out all about the newly introduced UPS scheme, its details and benefits.
What is Unified Pension Scheme?
The Central Government announced the Unified Pension Scheme (UPS) for government employees. It aims to provide stability, dignity and financial security for government employees post-retirement, ensuring their well-being and a secure future.
Currently, government employees are covered under the National Pension System (NPS). These employees have the option to continue with NPS or switch to the UPS scheme. However, once employees choose UPS, the decision is final and cannot be reversed.
The state governments can also adopt and implement the UPS scheme for state government employees. Maharashtra is the first state to implement UPS. The Maharashtra cabinet decided to implement the UPS scheme for state government employees on 25 August 2024.
If all states adopt the UPS scheme, it could benefit over 90 lakh government employees currently covered under the NPS scheme across India.
Unified Pension Scheme details
| Scheme Name | Unified Pension Scheme (UPS) |
| Announced on | 24 August 2024 |
| Notified on | 25 January 2025 |
| Implementation Date | 1 April 2025 |
| Beneficiaries | Central Government employees |
| Employee Contribution | 10% of basic salary + dearness allowance |
| Employer Contribution | 18.5% of basic salary + dearness allowance |
| Benefits |
|
UPS Scheme eligibility
- Government employees who have completed at least 10 years of service are eligible for a fixed pension amount.
- Government employees who have completed at least 25 years of service are eligible to receive a percentage of their average basic pay as a pension.
- Government employees who are covered under the National Pension System (NPS) and those opting for Voluntary Retirement Scheme (VRS) under NPS.
UPS Scheme minimum pension amount
The UPS guarantees a minimum pension of Rs. 10,000 per month for government employees who retire after completing at least 10 years of service.
UPS Scheme benefits
- Assured pension: Retired employees will receive a pension of 50% of their average basic pay over the previous 12 months before retirement. This benefit is provided to employees with at least 25 years of service. Proportionate pension benefits are offered to employees with shorter service periods (10 years to 25 years).
- Government contribution: The government will contribute 18.5% of the employee’s basic salary to the pension fund. The employees will contribute 10% of their basic salary to the pension fund.
- Assured family pension: In case of the pensioner’s death, 60% of the pension immediately before the retiree’s demise will be given to her/his spouse.
- Assured minimum pension: An employee with at least 10 years of service will receive Rs. 10,000 per month upon superannuation.
- Inflation indexation: Inflation indexation will be provided on assured pension, assured minimum pension and assured family pension. The Dearness Relief (DR) will be based on the All India Consumer Price Index for Industrial Workers (AICPI-IW) similar to service employees.
- Lump sum payment: Retirees will receive a lump sum payment along with their gratuity at the time of superannuation. This payment will be equal to one-tenth of the monthly emoluments (pay + DA) as on the superannuation date for every six months of completed service. It will not reduce the amount of assured pension.
UPS Scheme returns
The UPS scheme provides an assured pension amount to government employees upon their retirement. Employers will contribute 18.5% of the basic salary + dearness allowance, while employees will contribute 10% of the basic salary + dearness allowance every month.
For employees who have retired after a minimum service of 25 years, 50% of their average basic pay drawn in the previous 12 months prior to retirement will be provided as a pension. For employees who have retired after a minimum service of 10 years, Rs. 10,000 per month is provided as a pension after retirement.
Unified Pension Scheme vs NPS
The below table provides the differences between UPS and NPS:
| Particulars | UPS | NPS |
| Employers contribution | Employers will contribute 18.5% of the basic salary to the pension fund. | Employers will contribute 14% of the basic salary to the pension fund. |
| Pension amount | 50% of the average basic pay over the last 12 months before retirement for employees with 25 years of service. | NPS does not provide a guaranteed fixed pension amount. It depends on the returns on investments and the total accumulated corpus. |
| Family pension | In the case of the retiree’s death, 60% of the pension received immediately before the retiree’s demise will be provided to his/her family. | The family pension provided under the NPS depends on the accumulated corpus and the chosen annuity plan. |
| Minimum pension amount | Rs. 10,000 per month for employees retiring with at least 10 years of service. | The pension amount depends on the investments made in the market-linked investment schemes. |
| Lump sum amount | A lump sum amount is provided to employees upon superannuation, calculated as 1/10th of their last drawn monthly pay for every six months of completed service. | Employees can withdraw up to 60% of the NPS corpus as a lump sum upon superannuation. |
| Inflation protection | The UPS provides inflation protection, with pensions adjusted based on the AICPI-IW. | There is no provision in NPS for automatic DA increments for inflation protection. |
The UPS draws features from both the Old Pension Scheme (OPS) and the National Pension Scheme (NPS). UPS provides assured pensions, minimum pensions, and family pensions, providing security to retired employees. It also offers protection against inflation by adjusting the Dearness Relief (DR) of the employees.