UPS: Exciting news for 2.3 million central government employees! The Unified Pension Scheme (UPS) is set to launch on April 1, 2025. Curious about what this scheme offers and who can take advantage of it? Keep reading for all the details.
Introducing the new pension scheme for central government employees
The Unified Pension Scheme is a fresh approach that merges the best aspects of the Old Pension Scheme and the National Pension System. It promises a reliable pension for participants. Central government employees currently enrolled in the NPS can transition to the UPS.
What’s the government’s contribution?
It’s important to note that the UPS is exclusively for government employees who are part of the NPS. Those who choose to switch to UPS will not receive any additional policy benefits, changes, or financial perks. Once they make the switch, they cannot revert their decision. Under this scheme, the government will contribute 18.5% of the total basic pay plus dearness allowance (DA), an increase from the previous 14%. Employees will still contribute 10% towards their pension.
Who stands to gain from the UPS?
1. All employees retiring under the NPS after March 31, 2025, will benefit from this scheme.
2. Central government employees will receive a fixed pension amounting to 50% of their average basic salary over the last 12 months.
3. To qualify for the pension, employees must have served for a minimum of 25 years.
4. In the event of an employee’s death, their family will receive 60% of the pension as a family pension.
5. Employees with at least 10 years of service will be guaranteed a minimum pension of Rs. 10,000.
6. For those with service between 10 and 25 years, the pension amount will be calculated on a pro-rata basis.
7. Regardless of how many years an employee has served, their minimum pension will be no less than Rs. 10,000.
4 Key Features of the Unified Pension Plan
Guaranteed Pension
Employees who retire after completing a minimum of 25 years of qualifying service will receive a pension amounting to 50 percent of their average basic pay from the last 12 months before retirement.
Family Pension Assurance
In the unfortunate event of the employee’s passing, their family will receive 60 percent of the last pension amount.
Minimum Pension Guarantee
Upon retirement after at least 10 years of service, individuals are entitled to a guaranteed minimum pension of Rs. 10,000 per month.
Inflation Adjustment
Industrial workers will receive a Dearness Allowance based on the All India Consumer Price Index (AICPE-IW). For military personnel, in addition to gratuity, a lump sum equivalent to 1/10th of their monthly pay (including pay + DA) will be granted for every six months of service at the time of retirement. This allowance will not affect the guaranteed pension amount.
Who Needs to Complete Which Form?
1. Current employees, those who began government service after January 1, 2004, and individuals who have chosen the NPS can opt for the UPS by filling out Form A2.
2. New employees starting on or after April 1, 2025, can also select this option and will need to complete Form A1.
3. Retired employees who previously chose NPS can also enroll in UPS. They need to fill out Form B2 and provide eKYC documents.
4. If an employee passes away, their legally married spouse must submit Form B6 along with the necessary eKYC documents.
5. For those who have opted for Voluntary Retirement (VRS), the guidelines for individuals with 25 years of service will be applicable. However, these employees must wait until they turn 60 to start receiving their pension.
How much pension can you expect?
1. Let’s break it down with an example. If an employee’s average basic salary over the last 12 months before retirement is Rs. 50,000 and they have worked for 25 years with a monthly contribution of 10 percent, their monthly pension will amount to Rs. 25,000 plus Dearness Relief (DR).
2. For an employee with 15 years of service, the pension will be Rs. 15,000 plus DR, calculated at a rate of 30 percent.
3. An employee earning a basic salary of Rs. 40,000 and having 20 years of experience will receive a pension of 40 percent, which totals Rs. 16,000 plus DR.