Union Cabinet Approves Unified Pension Scheme for Central Government Employees

In a significant move aimed at enhancing financial security for central government employees, the Union Cabinet, led by Prime Minister Narendra Modi has approved the Unified Pension Scheme (UPS) on Saturday.

The scheme, which will come into effect on April 1, 2025, is set to benefit 23 lakh central government employees, with the potential to extend to 90 lakh employees if state governments choose to adopt the same framework.

Key Features of the Unified Pension Scheme:

1. Assured Pension: Under the UPS, government employees will receive an assured pension equivalent to 50% of their average basic pay drawn over the last 12 months prior to retirement. This benefit is available for those with a minimum of 25 years of service. Employees with shorter service periods (minimum 10 years) will receive a proportionate pension based on their years of service.

2. Minimum Pension Guarantee: The scheme ensures a minimum pension of Rs 10,000 per month for those retiring after at least 10 years of service.

3. Family Pension: In the event of the employee’s demise, the surviving spouse or family members will receive an assured family pension equivalent to 60% of the employee’s pension.

4. Inflation Indexation: To protect pensioners from inflation, the scheme includes inflation indexation for the assured pension, family pension, and minimum pension. Dearness relief will be linked to the All India Consumer Price Index for Industrial Workers (AICPI-IW), similar to serving employees.

5. Lump Sum Payment: Retirees will also be entitled to a lump sum payment at the time of retirement, in addition to their gratuity. This payment will be calculated as one-tenth of the monthly emoluments (pay + dearness allowance) at the time of retirement, for every six months of completed service. Notably, this will not affect the quantum of the assured pension.

Applicability to Past Retirees:

In a notable provision, the UPS will also apply to retirees under the National Pension System (NPS) who have already retired. These individuals will receive arrears with interest calculated at Public Provident Fund (PPF) rates for the past period.

The scheme ensures that there will be no increase in the employee contribution under the new system. However, the government will raise its contribution from 14% to 18.5% to support the implementation of the UPS.

Employees currently enrolled in the NPS will have the option to switch to the new UPS. However, once a choice is made, it will be considered final. This flexibility allows both existing and future employees to choose the scheme that best suits their needs.

The Union Cabinet has laid the groundwork for state governments to adopt a similar pension framework. This could potentially extend the benefits of the UPS to a vast number of state government employees currently under the NPS.

Prime Minister Narendra Modi, in a social media post, highlighted the importance of the Unified Pension Scheme, stating, "We are proud of the hard work of all government employees who contribute significantly to national progress. The Unified Pension Scheme ensures dignity and financial security for government employees, aligning with our commitment to their well-being and a secure future."

We are proud of the hard work of all government employees who contribute significantly to national progress. The Unified Pension Scheme ensures dignity and financial security for government employees, aligning with our commitment to their well-being and a secure future.…

— Narendra Modi (@narendramodi) August 24, 2024

Economist Madan Sabnavis, from Bank of Baroda, also praised the scheme, calling it "a positive step towards harmonizing old and new pension systems," and emphasizing the importance of the guaranteed benefits under the UPS.

Also Read: Protest At Gauhati University Demanding Restoration Of Old Pension Scheme