With barely a week left for Budget 2025, the finance ministry has officially introduced the Unified Pension Scheme (UPS) as an alternative for central government employees enrolled in the National Pension System (NPS).
The government has specified that the Unified Pension Scheme (UPS) will now be available for Central Government employees who are currently participating in the NPS, giving them the opportunity to opt for UPS if desired. This decision requires employees to take proactive steps to enroll in the UPS.
"The existing Central Government Employees under National Pension System, on the effective date of operationalisation of the Unified Pension Scheme option, as well as the future employees of the Central Government can choose to either take the Unified Pension Scheme option under the National Pension System or continue with the National Pension System without the Unified Pension Scheme option,” it said.
Both current and future Central Government employees covered under the National Pension Scheme (NPS) have the option to choose between the Unified Pension Scheme (UPS) or continue with the existing NPS plan. Once a decision is made to switch to the UPS, it is considered final and binding.
Additionally, special provisions have been made for employees who retired under NPS before the introduction of the UPS. These retirees will receive arrears calculated at the Public Provident Fund interest rates, along with monthly top-ups after adjustments are made for previous withdrawals and annuities.
In order to transition to the UPS and start receiving assured payouts, employees must transfer their NPS corpus to the new scheme. If an individual's corpus does not meet the benchmark, they have the option to contribute the shortfall to ensure full payouts. Conversely, any excess in the corpus after meeting the benchmark will be refunded to the employee.
This framework ensures a smooth transition and operationalization of the Unified Pension Scheme for Central Government employees under NPS.
Guaranteed Pension Benefits with UPS
The UPS scheme provides assured payouts (bold) in the following scenarios:
Upon an employee reaching the age of superannuation after completing ten years of qualifying service.
If the Government retires an employee according to the provisions of FR 56 (j) (without it being a penalty under the Central Civil Services (Classification, Control and Appeal) Rules, 1965).
In the event of voluntary retirement after a minimum qualifying service period of 25 years, based on the anticipated superannuation date if the service had continued.
It is important to note that the guaranteed payout will not be applicable in cases of employee removal, dismissal, or resignation. In such instances, the Unified Pension Scheme option will not be valid.
Assured payouts under UPS
According to the government notification, the UPS provides a guaranteed payout to employees upon superannuation.
Those with 25 or more years of qualifying service will receive 50% of their average basic pay from the last 12 months before retirement as the full assured payout.
Employees with less than 25 years of service will receive a proportionate payout.
A minimum payout of Rs 10,000 per month is assured for employees with 10 or more years of qualifying service. For those who choose to retire voluntarily after 25 years of service, the payout will begin from the date they would have reached superannuation if they had continued working.
In the event of the payout holder's death after superannuation, a family payout at 60% of the payout admissible to the holder will be given to the legally wedded spouse.
Additionally, dearness relief will be available on the assured payout and family payout, calculated in the same manner.