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The Indian government has introduced the Unified Pension Scheme (UPS), a new initiative aimed at enhancing the financial security of central government employees. The scheme, which will come into effect on April 1, 2025, promises a more comprehensive and beneficial approach to retirement benefits for approximately 23 lakh employees across the country. The UPS represents a significant shift from the existing National Pension System (NPS), offering a blend of guaranteed benefits and flexibility for employees. While existing employees have the option to continue under the NPS, future government hires will automatically be enrolled in the UPS.
A key feature of the UPS is the assurance of a minimum monthly pension of Rs 10,000 for employees retiring after completing at least 10 years of service. This provision offers a safety net for employees who may not have accumulated a significant pension amount under the NPS. For those who complete 25 years or more of service, the scheme promises a more substantial pension, equivalent to 50% of their average basic pay over the final 12 months of employment. This benefit is further enhanced by the inclusion of a lump-sum payment at superannuation, calculated as one-tenth of the monthly emoluments for every six months of completed service. This lump-sum payment does not affect the guaranteed pension amount, ensuring a more secure financial cushion for retirees.
The UPS also includes provisions for inflation protection and family benefits. Pensions will be indexed to inflation based on the All India Consumer Price Index for Industrial Workers (AICPI-IW), ensuring that retirees' purchasing power remains stable over time. In the unfortunate event of a retiree's death, their family will receive 60% of the pension the retiree was receiving. The government's contribution to the pension fund is also being increased from 14% to 18.5%, while employee contributions remain unchanged. This increased government contribution signifies a commitment to providing a stronger financial foundation for the scheme. Furthermore, the scheme's architecture is adaptable for adoption by state governments, potentially expanding its benefits to over 90 lakh employees nationwide.
Source: Unified Pension Scheme: Eligibility, Minimum Amount, Key Benefits