The Union Ministry of Finance notified the Unified Pension Scheme (UPS) which promises an assured pension.

• Applicable to employees who opt for this scheme under NPS.
• Operational from April 1, 2025.
• PFRDA (Pension Fund Regulatory and Development Authority) will issue regulations for its implementation.

Salient Features of UPS: Assured Pension

• • 50% of average basic pay drawn over the last 12 months before superannuation.
  • Minimum qualifying service: 25 years.
  • For service periods less than 25 years, pension will be proportionate (minimum 10 years of service required).
• Assured Family Pension: 60% of the employee’s pension immediately before their demise.
• Minimum Pension: ₹10,000/month on superannuation after a minimum of 10 years of service.
• Inflation Indexation: Applies to assured pension, family pension, and minimum pension.
  • Dearness Relief will be based on the All India Consumer Price Index for Industrial Workers (AICPI-IW), similar to existing service employees.
• Lump Sum Payment: At superannuation, employees will receive a lump sum payment in addition to gratuity.

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• • Gratuity: 1/10th of monthly emoluments (basic pay + DA) for every completed six months of service.
• Voluntary Retirement: UPS option available after 25 years of qualifying service.
  • Assured payout starts from the date the employee would have superannuated if they had continued in service.
• Exclusions: No assured payout in cases of removal, dismissal, or resignation.
• Contribution Structure:
  • Employee Contribution: 10% of (basic pay + DA).
  • Government Contribution:
    • Matching contribution: 10% of (basic pay + DA) to the individual corpus.
    • Additional contribution: 8.5% of (basic pay + DA) to the pool corpus (aggregate basis).
  • Total Government Contribution: 18.5% (up from 14% under NPS).

Significance

• Provides financial security to government employees post-retirement.
• Ensures inflation-adjusted pensions, protecting retirees from rising costs.
• Encourages long-term service by linking pension benefits to years of service.
• Complements the National Pension System (NPS) by offering an assured pension option.

Associated Concerns with UPS

• Market risk: The UPS incorporates market-based returns, which means that your pension could still be affected by market volatility, similar to NPS.
• Lower guaranteed pension: While the UPS offers more security than the NPS, it might not match the full guaranteed benefits of the OPS, particularly if market conditions are unfavourable.
• Limited flexibility: The hybrid nature of the UPS may limit flexibility compared to the OPS. Adapting to this new system might require a better understanding of both defined benefits and contribution-based pensions.
• Political opposition: Implementing the UPS may face political challenges, particularly from those who oppose changes to the existing pension schemes.
• Logistical challenges: There will be significant logistical challenges in implementing the UPS due to the large number of people and organisations it covers.
• Loss on taking VRS: If an employee takes a Voluntary Retirement Scheme (VRS) before completing 25 years of service, will not receive pension benefits from the date of VRS but once he reaches the age of 60.

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Differences between UPS, NPS and OPS (Old Pension Scheme)

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