Unified Pension Scheme

The Union Cabinet recently approved the Unified Pension Scheme (UPS), offering government employees an assured pension from April 1, 2025

The UPS is designed to enhance retirement benefits for government employees in India by integrating features from the Old Pension Scheme (OPS) and the National Pension System (NPS).

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. Those with fewer years will get a proportionate pension, with a minimum qualifying service of 10 years.
Assured Family Pension: If an employee passes away, their spouse will receive a family pension amounting to 60% of the pension the employee was receiving.
Assured Minimum Pension: Employees with at least 10 years of service will receive a minimum pension of ₹10,000 per month upon retirement.
Inflation Indexation: The pensions under UPS will be subject to inflation adjustments through dearness relief based on the All India Consumer Price Index for Industrial Workers (AICPI-IW), maintaining the purchasing power of retirees in alignment with current economic conditions
Lump Sum Payment on Superannuation: In addition to gratuity, employees will receive a lump sum payment at retirement, equal to 1/10th of their monthly emoluments (including pay and Dearness Allowance) for every six months of service completed. This lump sum will not affect the assured pension amount.

The Unified Pension Scheme (UPS) is available to those who retired under the NPS from 2004 onwards, with arrears adjusted against NPS payments.
Employees can choose to stay with the NPS, but this option is final.
The scheme applies to central government employees but can be adopted by states.

For central government employees, now have a choice to choose between UPS and NPS. UPS will provide them with a guaranteed pension amount, whereas NPS will offer market-linked returns.
For private sector employees, nothing changes.

Unlike NPS, the fixed pension under UPS will impose an additional burden on the government as it will be a fixed expense. The government has also increased their contribution to 18.5%. All of this is expected to increase their pension expenses by ₹6,250 crore every year.

Feature	Unified Pension Scheme	National Pension Scheme	Old Pension Scheme
Pension Guarantee	50% of average basic pay from the last 12 months before retirement. For service 10-25 years, proportional.	No fixed Pension	50% of their last drawn basic salary as a monthly pension.
Pension contributions	Employees contribute 10% of their basic salary while the govt contributes 18.5%.	Employees contribute 10% of their basic salary while the govt contributes 14%.	No contribution from the employees; the govt bears the entire cost.
Inflation Protection	Linked to CPI (Consumer Price Index) for Industrial workers.	No standardised inflation protection; Pension is market-linked.	Pension amounts are adjusted via dearness allowance.
Family Pension	60% of the employee’s pension upon their death.	No Fixed pension; depends upon accumulated corpus and annuity plans at their retirements.	30-50% of the employee’s pension upon their death.
Lump sum Payments	1/10th of the monthly emolument (pay plus dearness allowance) for every six months of service completed, in addition to gratuity.	Market-linked partial withdrawal allowed	Only through pension commutation
Taxation	Clarity needed	14% deduction on government contribution	No tax benefits
*Minimum Pension (subject to a minimum of 10 years of service)*	10,000 Rs	No	9,000 Rs