Unified Pension Scheme: Here's everything you need to know

As per the new scheme, employees who joined the government services in 2004 and are covered by the National Pension System (NPS), will have the option to shift to UPS. UPS will be implemented from April 2025.

The new scheme guarantees pensioners a regular, predetermined amount after retirement.

If a person works for 25 years or more under UPS, they will receive a pension that is 50% of their average income from the previous 12 months, with an inflation-adjusted dearness allowance.

Contribution of employees

Under the UPS, employee contributions won't change. However, the government will increase its 14% contribution to 18.5%.

People will get a lump sum payment at superannuation combined with a gratuity when they retire from UPS. For every six months of completed service, this will be equal to one-tenth of monthly emoluments (Pay + DA) on the day of superannuation. The guaranteed pension amount will not be reduced by this payment.

Minimum Pension

After at least 25 years of qualifying service, retirees under UPS will earn 50% of their average basic pay for the final 12 months before retirement. Pensions for shorter service durations will be commensurate and require a minimum of ten years of service. At least, ten years of service will be required before receiving a pension of 10,000 per month.

UPS and Inflation:

Under UPS, pension benefits will be adjusted for inflation. As with service employees, the basis for Dearness Relief will be the All India Consumer Price Index for Industrial Workers (AICPI-IW).

If a Pensioner dies:

If a retiree passes away, 60% of the pension the worker was receiving will go to their family.

Funding of UPS:

In contrast to OPS, whose budget makers do not set aside funds in the same way that a business develops a pension reserve, UPS uses actuarial calculations to estimate potential liabilities. Every three years, an actuarial evaluation assessment will take place.

Retirees Under NPS:

The UPS's provisions will apply to former NPS pensioners who have already reached superannuation. Past-due arrears will be settled with interest at PPF rates.

Switch from UPS to NPS:

People cannot go back to NPS after selecting UPS. The government claims that both current and prospective NPS/VRS workers will have the opportunity to join UPS. Nevertheless, the decision will be final once it is exercised.

According to the government, over 99% of workers will benefit more from moving to the new program. After retirement, a part of the fund must be invested in an annuity under NPS. But with low annuity rates in India, people will need a sizable corpus to get a 50% return on their investment. The 50% pension guarantee under UPS, is a safer option.