The Unified Pension Scheme (UPS) will replace the National Pension System (NPS) for central government employees starting April 1, 2025, ensuring a guaranteed pension after retirement. The Pension Fund Regulatory and Development Authority (PFRDA) has issued a notification confirming its implementation. Unlike NPS, which relied on market-based returns, UPS offers a fixed pension benefit, addressing long-standing concerns about post-retirement financial security.
The move comes amid growing pressure on the Union government, as several Congress-ruled states, including Rajasthan, Chhattisgarh and Himachal Pradesh, have reinstated the Old Pension Scheme (OPS) for state government employees. The return to OPS in these states reignited demands for a more secure pension system at the national level, pushing the central government to revise the existing NPS structure and introduce UPS as a middle-ground solution.
Key Features of the Unified Pension Scheme (UPS)
- Guaranteed Pension Benefits
- Employees completing 25 years of service will receive 50% of their last 12 months’ average salary as a guaranteed pension.
- Employees with at least 10 years of service will receive a minimum pension of ₹10,000 per month after retirement.
- Contribution Structure
- Employees will contribute 10% of their basic salary and Dearness Allowance (DA) every month.
- The government will contribute 18.5% of the employee’s basic salary and DA to the pension fund.
- Retirement and Lump Sum Withdrawals
- Upon retirement, 60% of the accumulated corpus can be withdrawn as a lump sum.
- The remaining 40% will be converted into a pension, ensuring a stable monthly income.
- Family Pension Benefits
- If an employee passes away after retirement, 60% of the last drawn pension will be provided to the family as a survivor pension.
Who Will Benefit from the UPS?
The scheme is applicable to:
- All central government employees under NPS as of April 1, 2025.
- New recruits joining central government services after this date.
- Retired NPS employees and their legally wedded spouses (if the retiree has passed away before implementation).
Financial Implications and Implementation; Why the Shift from NPS to UPS?
To facilitate the transition from NPS to UPS, the government has allocated ₹70 billion for the fiscal year 2025. The official enrollment process will begin on April 1, 2025, with employees able to submit applications online via the Protean CRA website or physically through designated centers.
The shift from NPS to UPS comes in response to persistent demands from government employees for a more stable and predictable pension system. While NPS relied on market-based investments, leading to uncertainty in pension payouts, UPS guarantees a fixed pension based on salary levels, similar to the Old Pension Scheme (OPS) but with structured employee and employer contributions.
With the implementation of the Unified Pension Scheme, the government aims to provide financial stability to its workforce while ensuring a sustainable pension model for the future.
