The Unified Pension Scheme (UPS), introduced by the NDA government as an alternative to the current National Pension System (NPS), has sparked significant speculation concerning its reach and pension fund. Subscribers of the NPS under the government who transition to the UPS or new entrants stand to benefit from its enhanced security in the form of stable, inflation-adjusted pension disbursement.
This new scheme aims at offering an assured pension which is likely to benefit 23 lakh central employees. This upcoming scheme is scheduled to go into effect on April 1, 2025.
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UPS has announced two significant updates that aim to improve its appeal to potential employees. Firstly, it introduces a new feature that guarantees a fixed pension payout post-retirement. Employees who have served the company for 25 years or more will be entitled to receive 50% of their average salary from the preceding 12 months as a pension. With a minimum service requirement of 10 years, individuals can anticipate a pension of Rs. 10,000 per month. For those with service periods falling between 10 and 25 years, the pension amount will be calculated proportionally based on their tenure.
Besides, UPS will be providing inflation indexation for the assured pension, assured family pension, and assured minimum pension. This indexation aims to ensure that these pensions are adjusted to account for changes in the cost of living over time.
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What if the service years are less than 25
Government employees who are in service for less than 25 years, the benefits will be given on pro rata basis. Under the UPS, employees who retire without completing twenty-five years of service are still eligible to receive pensions. This scheme ensures a minimum monthly pension benefit of Rs 10,000 for those who retire after serving a minimum of ten years.
Employees with service periods falling between 10 and 25 years will have their pension amount calculated proportionally according to their tenure
Under the unified system, employee contributions will remain unaltered at 10 per cent of basic pay plus dearness allowance (DA). The government’s contribution will increase from the present 14 per cent to 18.5 per cent.
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Unified Pension Scheme Features
> Assured Pension: Amount: 50% of the average basic pay drawn over the last 12 months prior to superannuation.
> Minimum Qualifying Service: 25 years.
> Proportionate pay for service period less than 25 years, with a minimum of 10 years of service.
> Assured Family Pension:
Amount: 60% of the employee’s pension immediately before their demise.
Assured Minimum Pension:
Amount: Rs 10,000 per month on superannuation after a minimum of 10 years of service.
> Inflation Indexation:
Applicable to assured pension, assured family pension, and assured minimum pension.
> Dearness Relief:
Based on the All India Consumer Price Index for Industrial Workers (AICPI-IW), similar to service employees.
> Lump Sum Payment at Superannuation:
Additional to gratuity.
Amount: 1/10th of monthly emoluments (pay + DA) as on the superannuation date for every completed six months of service.
This payment will not reduce the quantum of assured pension.
