The Finance Ministry has announced the implementation of Unified Pension Scheme (UPS) as a new option for central government employees under the National Pension Scheme (NPS). The new Unified Pension Scheme (UPS) will come into effect from April 1, 2025. The Union Cabinet approved the scheme in August 2024. The main objective of the Unified Pension Scheme is to provide financial stability, assured pension, inflation protection and post-retirement security for central government employees, which will benefit about 23 lakh employees. Employees can opt for UPS instead of NPS, but once they opt for UPS, the decision is final and irrevocable.
State governments can also adopt the Unified Pension Scheme and reports suggest that Maharashtra could be the first state to adopt the scheme. If the scheme is implemented at the national level, it will benefit 90 lakh government employees
Key Features and Benefits of Unified Pension Scheme (UPS):
• Financial Stability and Assured Pension: Employees with 25 years of service will get 50% of the average basic salary for the last 12 months before retirement as pension.
• Minimum Pension Benefit: Employees with minimum service of 10 to 25 years will get a minimum pension of Rs. 10,000 per month.
• Family Pension: In case of death of the pensioner, the family members will get 60% of the last pension of the retiree.
• Inflation Adjustment: Dearness Allowance (DA) will be adjusted based on the All India Consumer Price Index (CPI).
• Retirement Benefit: At the time of retirement, the employee will get a lump sum amount of 1/10th of the last salary drawn for 6 months of completed service.
• Minimum Pension Benefit: Employees with minimum service of 10 to 25 years will get a minimum pension of Rs. 10,000 per month.
• Family Pension: In case of death of the pensioner, the family members will get 60% of the last pension of the retiree.
• Inflation Adjustment: Dearness Allowance (DA) will be adjusted based on the All India Consumer Price Index (CPI).
• Retirement Benefit: At the time of retirement, the employee will get a lump sum amount of 1/10th of the last salary drawn for 6 months of completed service.
Eligibility Criteria for UPS:
• Central Government employees eligible under National Pension Scheme (NPS) can opt for UPS.
• Those who opt for UPS will have to convert their personal retirement fund into an investment fund.
• Government employees retiring before April 1, 2025 can also opt for UPS through the top-up mechanism of PFRDA.
• Employees with 10 years of service will be eligible for defined benefit pension.
• Employees with 25 years of service will be eligible for percentage based pension.
Employee and Employer Contribution:
• Employee Contribution: 10% of basic salary + Dearness Allowance (DA)
• Employer Contribution: 10% equivalent contribution to the employee's personal fund and an additional 8.5% contribution to a pooled fund for guaranteed pension.
• Those who opt for UPS will have to convert their personal retirement fund into an investment fund.
• Government employees retiring before April 1, 2025 can also opt for UPS through the top-up mechanism of PFRDA.
• Employees with 10 years of service will be eligible for defined benefit pension.
• Employees with 25 years of service will be eligible for percentage based pension.
Employee and Employer Contribution:
• Employee Contribution: 10% of basic salary + Dearness Allowance (DA)
• Employer Contribution: 10% equivalent contribution to the employee's personal fund and an additional 8.5% contribution to a pooled fund for guaranteed pension.
UPS vs NPS Comparative Analysis:
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Frequently Asked Questions (FAQ):
Q1: What is the new pension scheme for central government employees?
Answer: The new Unified Pension Scheme (UPS) is a new pension scheme for central government employees which provides a guaranteed pension of 50% of the average salary of the last 12 months before retirement.
Q2: NPS or UPS is better?
Answer: Unified Pension Scheme (UPS) is better than NPS as it provides guaranteed pension, financial stability and inflation protection.
Q3: What is UPS for central government employees?
Answer: Central government employees eligible under NPS can opt for UPS. It is a scheme providing guaranteed pension.
Q4: Which bank is good for NPS?
Answer: Many banks are good for NPS, such as: Axis Bank, ICICI Bank, IDBI Bank etc.
Q 5: Who is eligible for UPS?
Answer: Those who have 25 years of service are eligible for percentage based pension and those who have minimum 10 years of service will get fixed pension benefits.
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