Unified Pension Scheme (UPS): Eligibility, Benefits & Returns

The Union Cabinet, chaired by Prime Minister Narendra Modi, approved the Unified Pension Scheme (UPS) for central government employees on Saturday. This scheme will be effective from April 1, 2025, and will benefit 23 lakh central government employees. This new scheme combines the best elements of the Old Pension Scheme (OPS) and the National Pension Scheme (NPS).

The Unified Pension Scheme (UPS) has been launched to provide government employees with a steady pension based on their length of service and the most recent basic salary drawn.
It aims to provide a balanced approach to pension management for government employees, combining the stability of the OPS (Old Pension Scheme) with the fiscal responsibility of the NPS (New Pension Scheme).
The UPS is available to all government employees who have retired under the NPS since 2004. They can choose to switch to the UPS and receive arrears adjusted for any amounts already withdrawn under the NPS.
Employees have the option to remain with the NPS, but this decision is final once made.

Unified Pension Scheme details

Scheme Name	Unified Pension Scheme (UPS)
Announced on	24 August 2024
Implementation Date	1 April 2025
Beneficiaries	Central Government employees
Employee Contribution	10% of basic salary + dearness allowance
Employer Contribution	18.5% of basic salary + dearness allowance
Benefits	A pension of 50% of the average basic pay over the last 12 months before retirement for employees having at least 25 years of service. Rs. 10,000 per month upon superannuation after a minimum of 10 years of service.

UPS Scheme eligibility

Government employees who have completed at least 10 years of service are eligible for a fixed pension amount.
Government employees who have completed at least 25 years of service are eligible to receive a percentage of their average basic pay as a pension.
Government employees who are covered under the National Pension System (NPS) and those opting for Voluntary Retirement Scheme (VRS) under NPS.

UPS Scheme minimum pension amount

The UPS guarantees a minimum pension of Rs. 10,000 per month for government employees who retire after completing at least 10 years of service.

UPS Scheme benefits

pension: Retired employees will receive a pension of 50% of their average basic pay over the previous 12 months before retirement. This benefit is provided to employees with at least 25 years of service. Proportionate pension benefits are offered to employees with shorter service periods (10 years to 25 years).
Government contribution: The government will contribute 18.5% of the employee’s basic salary to the pension fund. The employees will contribute 10% of their basic salary to the pension fund.
Assured family pension: In case of the pensioner’s death, 60% of the pension immediately before the retiree’s demise will be given to her/his spouse.
Assured minimum pension: An employee with at least 10 years of service will receive Rs. 10,000 per month upon superannuation.
Inflation indexation: Inflation indexation will be provided on assured pension, assured minimum pension and assured family pension. The Dearness Relief (DR) will be based on the All India Consumer Price Index for Industrial Workers (AICPI-IW) similar to service employees.
Lump sum payment: Retirees will receive a lump sum payment along with their gratuity at the time of superannuation. This payment will be equal to one-tenth of the monthly emoluments (pay + DA) as on the superannuation date for every six months of completed service. It will not reduce the amount of assured pension.

UPS Scheme returns

The UPS scheme provides an assured pension amount to government employees upon their retirement. Employers will contribute 18.5% of the basic salary + dearness allowance, while employees will contribute 10% of the basic salary + dearness allowance every month. For employees who have retired after a minimum service of 25 years, 50% of their average basic pay drawn in the previous 12 months prior to retirement will be provided as a pension. For employees who have retired after a minimum service of 10 years, Rs. 10,000 per month is provided as a pension after retirement.

Unified Pension Scheme vs NPS

The below table provides the differences between UPS and NPS:

Particulars	UPS	NPS
Employers contribution	Employers will contribute 18.5% of the basic salary to the pension fund.	Employers will contribute 14% of the basic salary to the pension fund.
Pension amount	50% of the average basic pay over the last 12 months before retirement for employees with 25 years of service.	NPS does not provide a guaranteed fixed pension amount. It depends on the returns on investments and the total accumulated corpus.
Family pension	In the case of the retiree’s death, 60% of the pension received immediately before the retiree’s demise will be provided to his/her family.	The family pension provided under the NPS depends on the accumulated corpus and the chosen annuity plan.
Minimum pension amount	Rs. 10,000 per month for employees retiring with at least 10 years of service.	The pension amount depends on the investments made in the market-linked investment schemes.
Lump sum amount	A lump sum amount is provided to employees upon superannuation, calculated as 1/10th of their last drawn monthly pay for every six months of completed service.	Employees can withdraw up to 60% of the NPS corpus as a lump sum upon superannuation.
Inflation protection	The UPS provides inflation protection, with pensions adjusted based on the AICPI-IW.	There is no provision in NPS for automatic DA increments for inflation protection.

The UPS draws features from both the Old Pension Scheme (OPS) and the National Pension Scheme (NPS). UPS provides assured pensions, minimum pensions, and family pensions, providing security to retired employees. It also offers protection against inflation by adjusting the Dearness Relief (DR) of the employees.