Unified Pension Scheme: Understanding Key Benefits and Who Benefits

What is the Unified Pension Scheme (UPS)?

The UPS is a new pension policy for government employees that guarantees:

• An assured pension based on the employee’s average basic pay.
• A family pension to support the employee’s dependents in case of death.
• A minimum pension to ensure no retired employee receives less than Rs 10,000 per month.

Start Date and Key Benefits

The UPS will come into effect on April 1, 2025.

Key benefits include:

• Pension Rate: Employees with 25 years of service will receive 50% of their average basic pay over the last 12 months.
• Family Pension: In case of the employee's death, the family will receive 60% of the last drawn pension.
• Minimum Pension: All retired employees with at least 10 years of service will receive a minimum of Rs 10,000.
• Lump-Sum Payment: Employees will also receive a lump-sum payment at retirement based on their service years.
• Inflation Protection: Pensions will be indexed to inflation, ensuring they rise with the cost of living.

Impact on Past Retirees

Past retirees under the National Pension System (NPS) can switch to UPS, receiving arrears with interest.

Contribution Structure and Who Benefits

While employee contributions stay the same, the government’s contribution will increase to 18.5%. Approximately 23 lakh central government employees will benefit, with potential expansion to over 90 lakh state employees under NPS.

In summary, the Unified Pension Scheme or UPS offers better financial security to government employees with guaranteed fixed pensions and inflation protection, ultimately leading to a dignified retirement.