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Context:

The Union Government has notified the Unified Pension Scheme (UPS) for central employees.

What led to the introduction of the Unified Pension Scheme (UPS)?

The introduction of the UPS followed widespread grievances from central government employees and political controversies over the NPS. Some opposition-ruled states reverted to the Old Pension Scheme (OPS), prompting the central government to set up a committee led by then-finance secretary TV Somanathan in April 2023 to rework the pension system. The UPS was designed to address employee concerns while maintaining fiscal prudence.

About the Unified Pension Scheme (UPS)

It is a new pension framework introduced by the Union finance ministry for central government employees covered under the National Pension System (NPS).

It guarantees retirement benefits, offering 50% of the average basic pay drawn by an employee over the 12 months before retirement, provided they complete 25 years of service. The scheme will take effect on April 1, 2025.

The Pension Fund Regulatory and Development Authority (PFRDA) will issue regulations for operationalizing the Unified Pension Scheme (UPS). It will also supervise the implementation and management of the scheme to ensure compliance and efficiency.

Who is eligible for the Unified Pension Scheme (UPS)?

The UPS is applicable to central government employees who are covered under the National Pension System (NPS) and choose to opt for this scheme.

Employees who retired since 2004 are also eligible to opt for the UPS, while those who joined before April 2004 will continue under the Old Pension Scheme (OPS).

What are the key features of the Unified Pension Scheme (UPS)?

• Guaranteed pension: Employees will receive 50% of the average basic pay drawn over the 12 months before retirement if they complete 25 years of service.
• Proportionate pension: Employees with less than 25 years but more than 10 years of service will receive pension on a proportionate basis.
• Minimum pension: Employees with at least 10 years of service will receive a minimum assured pension of ₹10,000 per month.
• Family/survivor pension: Fixed at 60% of the last-drawn salary of a deceased employee.
• Indexation to CPI-IW: The pension will be indexed to the Consumer Price Index for Industrial Workers (CPI-IW) to calculate dearness relief, accounting for inflation.

How does the UPS differ from the Old Pension Scheme (OPS) and the National Pension System (NPS)?

• Old Pension Scheme (OPS): Offers a fixed pension of 50% of the last-drawn salary after retirement, but it is fiscally straining as it is unfunded.
• National Pension System (NPS): A market-linked, fully funded system where pension amounts depend on market returns.
• Unified Pension Scheme (UPS): It combines elements of both to offer guaranteed retirement benefits (like OPS) while maintaining fiscal prudence (like NPS). It aims to ensure a fixed payout while being indexed to inflation.

What are the benefits of the UPS for employees with less than 25 years of service?

Employees with less than 25 years but more than 10 years of service will receive a proportionate pension based on their years of service. They are guaranteed a minimum pension of ₹10,000 per month if they have completed at least 10 years of service.

Way forward

The UPS aims to address central government employees' demand for guaranteed retirement benefits. It provides financial security by ensuring a fixed pension, family/survivor benefits, and inflation-indexed adjustments, while maintaining fiscal prudence for the government.

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 Source: 

HINDUSTANTIMES.COM