Unified Pension Scheme Notification - Key Highlights for 2025
On January 24, 2025, the Ministry of Finance (Department of Financial Services) announced the introduction of the **Unified Pension Scheme (UPS)** under the National Pension System (NPS). This scheme offers a new retirement option for Central Government employees covered under NPS. Below are the details of the scheme, its features, eligibility criteria, and benefits:
1. What is the Unified Pension Scheme?
The Unified Pension Scheme (UPS) provides **assured payouts** to employees, making it a more secure retirement option under the NPS framework. The scheme focuses on ensuring a guaranteed post-retirement income based on defined contributions.
2. Effective Date
The scheme will be operational from **April 1, 2025**.
3. Eligibility Criteria
Employees covered under NPS are eligible for the scheme, provided they meet the following conditions:
- Superannuation after completing a minimum of **10 years of qualifying service**.
- Voluntary retirement after completing **25 years of qualifying service**.
- Employees retired under **FR 56(j)**.
- Employees dismissed, removed from service, or who resign are not eligible.
4. Key Features
(i) Contributions:
- Employee contribution: **10% of Basic Pay + Dearness Allowance (DA)**.
- Central Government contribution: **10% of Basic Pay + DA**.
- An **additional contribution** of 8.5% by the Central Government towards a pooled fund to support assured payouts.
(ii) Assured Payout:
- **50% of the last 12 months' average Basic Pay** for employees with at least 25 years of qualifying service.
- **Minimum payout**: ₹10,000/month for those with 10 years or more of service.
- Payouts commence on superannuation or specified dates based on the service period.
(iii) Family Benefits:
- In the event of the employee’s demise, **60% of the assured payout** will be provided to the legally wedded spouse.
(iv) Inflation Adjustment:
- **Dearness Relief (DR)** will be applicable, calculated in line with DA rates for serving employees.
(v) Investment Options:
- Employees can select investment options for their individual corpus.
- If no choice is made, a **default investment pattern** will apply.
(vi) Lump Sum Payment:
- On superannuation, employees receive a **lump sum payment** calculated at **10% of emoluments (Basic Pay + DA)** for every completed six months of qualifying service.
5. How Does it Work?
Example 1:
An employee retires with the following:
- Average Basic Pay for 12 months: ₹45,000.
- Qualifying service: 25 years (300 months).
- Corpus Value: ₹50,00,000.
Example 2:
An employee opts for voluntary retirement after 15 years:
- Average Basic Pay for 12 months: ₹45,000.
- Qualifying service: 15 years (180 months).
- Corpus Value: ₹30,00,000.
Lump Sum Payment Illustration:
For 25 years of service:
- Basic Pay: ₹45,000; DA: ₹23,850 (Total: ₹68,850).
- Lump Sum: ₹6,885 × 50 = ₹3,44,250.
6. Important Points to Note
- **Benchmark Corpus**: The corpus value is calculated based on contributions made by the employee and the employer, along with investment returns.
- **Shortfalls**: If the individual corpus is less than the benchmark corpus, the payout will be adjusted proportionately.
- **One-Time Opt-In**: Employees must opt for the scheme at the start, and the choice is irreversible.
- **For Past Retirees**: Retirees under NPS can also opt for this scheme and will receive arrears along with interest.
7. Benefits for Employees
- Provides financial security post-retirement.
- Guaranteed income ensures peace of mind for employees and their families.
- Inflation-linked payouts protect against rising costs.
8. Conclusion
The Unified Pension Scheme (UPS) is a significant step by the Central Government to enhance retirement benefits under NPS. By offering assured payouts and flexible investment options, it addresses the long-standing demand for a secure pension plan for government employees.
