Unified Pension Scheme to replace National Pension System in India
Government Scheme
3 min read
The Union Cabinet, in a meeting held on 24 August 2024 and chaired by Prime Minister Narendra Modi, has approved the Unified Pension System (UPS) for its employees. The new scheme will replace the existing National Pension System (NPS).
The National Pension System was mandatory for central government employees except for the armed forces, which joined the service on 1 January 2004. Later, many state governments implemented the NPS for their employees.
Implementation of the Unified Pension Scheme
According to the government of India the Unified Pension Scheme is proposed to be implemented from 1 April 2025.
Feature of the New Unified Pension Scheme
The new Unified Pension Scheme will have an assured pension with inflation indexation benefits and greater contributions from the central government. The National Pension System was a contributory pension scheme, where the pension amount depended upon the contributions made by the employees and the employers. It was not an assured pension scheme.
Mains points of the Unified Pension Scheme:
- A person who has worked for the central government for at least 10 years is eligible for a pension.
- The minimum assured pension will be Rs 10,000 per month.
- Central Government employees with at least 25 years of service will get an assured pension of 50 per cent of the average basic pay drawn over the last 12 months prior to retirement.
- Pension will be proportionate to the duration of the employee's employment.
- Family members will get 60% of the employee's pension immediately before her/his demise.
- The benefit of inflation indexation is that the pension amount will be increased based on the increase in the inflation rate.
- The scheme will use the All India Consumer Price Index for Industrial Workers for inflation indexation purposes.
- After retirement, the employee will get a lump sum amount according to a fixed formula.
