New Delhi: The central government has introduced a new Unified Pension Scheme (UPS) for central government employees, which will be available to those currently enrolled in the New Pension Scheme (NPS), including retirees. This new scheme promises a pension of 50% of the average basic pay from the last 12 months before retirement, provided employees have completed at least 25 years of service. This is a shift from the market-linked returns of the NPS.

Under the UPS, pensions will be proportionate for service periods of 10 to 25 years, with a guaranteed minimum pension of ₹10,000 per month for those who retire after at least 10 years of service. The scheme aims to address dissatisfaction with the NPS, which has been in place since January 1, 2004.

Previously, under the Old Pension Scheme (OPS), which was in effect before January 2004, employees received 50% of their last drawn basic pay as a pension. Unlike OPS, the new UPS is contributory. Employees will contribute 10% of their basic salary and dearness allowance, while the government will contribute 18.5%.

Under the NPS, employee contributions are 10%, with an employer contribution of 14%. Payouts under the NPS are dependent on market returns from investments, primarily in government debt. In contrast, OPS required no employee contribution, with retirement benefits paid from the General Provident Fund (GPF).

The introduction of UPS follows several states' decisions to revert to the OPS due to its more attractive benefits. To address these concerns, the government formed a committee in April 2023, led by former Finance Secretary TV Somanathan, to propose improvements to the NPS.

The Union Cabinet approved the UPS on August 24, 2024, promising benefits to 23 lakh central government employees. Those who choose UPS will not be able to revert to the NPS. The scheme will impose an additional annual cost of ₹6,250 crore on the government, with variations depending on the number of employees.

There will also be an ₹800 crore arrear payment under the NPS for employees retiring before March 31, 2025, who opt for the UPS.

Information & Broadcasting Minister Ashwini Vaishnaw announced that Maharashtra has become the first state to adopt UPS, ahead of its assembly elections later this year. If other states follow suit, over 90 lakh government employees on the NPS will benefit from the new scheme.

The Bharatiya Mazdoor Sangh (BMS) acknowledged the government’s efforts to address NPS shortcomings but noted that issues remain compared to OPS. BMS plans to review the UPS in detail before deciding its next steps.

Centre Approves Unified Pension Scheme (UPS) for Central Government Employees

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