• The Union Cabinet, chaired by Prime Minister Narendra Modi, approved the Unified Pension Scheme (UPS) for central government employees. 

• This scheme will be effective from April 1, 2025, and will benefit 23 lakh central government employees.

• To improve the pension system for government employees, the Finance Ministry had set up a committee last year under Finance Secretary T.V. Somanathan to review the pension scheme for government employees and suggest any changes, if needed, in the light of the existing framework and structure of the National Pension System.

Features of the Unified Pension Scheme:

• Assured Pension: Employees with a minimum qualifying service of 25 years will receive a pension amounting to 50 per cent of their average basic pay from the last 12 months before retirement. 

• For those with a shorter service period, the pension amount will be proportionately reduced, with a minimum qualifying period of 10 years.

• Assured Minimum Pension: The scheme also assures Rs 10,000 per month after retirement for government employees after a minimum of 10 years of service.

• Assured Family Pension: In the event of a retiree’s death, their immediate family is entitled to receive 60 per cent of the last drawn pension.

• Inflation Indexation: All three types of pensions will include dearness relief, which is adjusted according to the All India Consumer Price Index for Industrial Workers, similar to the adjustments for current employees.

• Lump Sum Payment at Superannuation: In addition to gratuity, retirees will receive a lump sum payment calculated as 1/10th of their monthly emolument (basic pay plus dearness allowance) on the date of retirement for every six months of service completed.

Contributions under the UPS:

• The scheme is contributory

• An employee will contribute 10 per cent of the salary.

• The government will contribute 18.5 per cent of the employee’s salary.

• The government’s contribution may be adjusted periodically based on actuarial assessments to ensure the sustainability of the scheme.

• If the state government joins UPS, they would bear the additional burden for those employees for the assured pension. 

National Pension System (NPS)

• The National Pension System (NPS) was launched on January 1, 2004 with the objective of providing retirement income to all the citizens. 

• NPS aims to institute pension reforms and to inculcate the habit of saving for retirement amongst the citizens.

• Initially, NPS was introduced for the new government recruits (except armed forces). With effect from May 1, 2009, NPS has been provided for all citizens of the country including the unorganised sector workers on a  voluntary basis.

(The author is a trainer for Civil Services aspirants.)