The new financial year kicks off on April 1, and that’s when a new scheme will roll out that directly affects central employees. It’s called the Unified Pension Scheme (UPS), which was introduced last year and is set to be implemented on April 1, 2025. This scheme gives central employees a choice between the National Pension Scheme (NPS) and the Unified Pension Scheme (UPS).
So, what makes this scheme stand out?
The UPS guarantees a pension for government employees. Those who have worked for at least 25 years will receive a pension equal to 50% of their average basic salary from the last 12 months before they retire. For employees with less than 25 years of service, the pension will be calculated based on their tenure, with a minimum service requirement of 10 years. There’s also a provision for a monthly pension of Rs 10,000 after at least 10 years of service. Plus, if an employee passes away, their spouse will receive a family pension amounting to 60% of the employee’s pension right before their death.
How much will everyone contribute?
Similar to the NPS, employees will need to contribute 10% of their basic salary to the UPS. To qualify for a pension under this scheme, a minimum of 10 years of service is required. The Government of India will chip in with an 18.5% contribution. Only employees who joined government service after January 1, 2004, and opted for the National Pension Scheme can enroll in the UPS.
How many workers will benefit from this?
The Pension Fund Regulatory and Development Authority (PFRDA) is set to roll out the required guidelines for this. This initiative is expected to help over 2.3 million central government employees. With this scheme, the government’s contribution will rise to 18.5 percent of the total basic pay and dearness allowance (DA), up from the previous 14 percent. Meanwhile, employees will still chip in 10 percent for their pension.