Unified Pension Scheme (UPS)

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Context

Recently, the Union Cabinet approved the Unified Pension Scheme (UPS).

Unified Pension Scheme (UPS): Details

• About: UPS has been created by merging elements of the Old Pension Scheme (OPS) and the National Pension System (NPS).
• Provision: Government employees currently covered under the NPS can either continue with NPS or switch to UPS.
• Implementation: The scheme will be effective from April 1, 2025.
• Eligibility: All Central government employees who retire on or before March 31, 2025, will be eligible under UPS.

Note: All government employees joining the service after April 1, 2004, are under the NPS. Now, NPS subscribers will be able to choose between NPS and UPS.

Key features of the Unified Pension Scheme (UPS)

Assured Pension:

• Government employees with at least 25 years of service will receive a guaranteed pension equal to 50% of their average basic pay from the last 12 months before retirement.
• The pension will be proportionate for shorter service periods, with a minimum of 10 years of service required.

Assured Family Pension:

In case of an employee's death, the family will receive 60% of the pension amount the employee received at the time of death.

Assured Minimum Pension: 

• A guaranteed minimum pension of Rs 10,000 per month is provided for those with at least 10 years of service.
• Aim of this feature: Financial safety net for lower-income retirees.

Inflation Indexation:

The assured and family pensions will be adjusted for inflation, ensuring they keep pace with rising prices.

Dearness relief:

Retirees under the UPS will receive Dearness Relief based on the All-India Consumer Price Index for Industrial Workers (AICPI-IW), similar to current employees.

Lump sum payment on superannuation: 

• In addition to gratuity, employees will receive a lump sum payment at retirement.
• The lump-sum payment would be equal to 1/10th of their monthly emoluments (including pay and Dearness Allowance) for every six months of service completed.
• This payment will not reduce the amount of the assured pension.

Contributions under the UPS

• Under the UPS, employee’s fixed contribution is 10% of their pay.
• The Government’s contribution is 18.5%.

Read all about Old Pension Scheme vs New Pension Scheme: https://www.iasgyan.in/daily-current-affairs/old-pension-scheme-vs-new-pension-scheme

SOURCE: PIB and Newspapers