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Unified Pension Scheme

Posted 17 Oct 2024

Updated 22 Oct 2024

3 min read

Why in the news?

Recently, Union Cabinet has approved the Unified Pension Scheme (UPS).

About Unified Pension Scheme

  • It is based on the recommendations of T. V. Somanathan Committee (2023). Persistent demands for Old Pension Scheme (OPS) led to its formation. 
  • Existing as well as future employees will have an option of joining New Pension Scheme or UPS. Choice, once exercised, will be final.
  • Provisions of UPS will apply to past retirees of NPS (who have already superannuated).

Comparison between Unified Pension Scheme, New Pension Scheme and Old Pension Scheme

Parameters

Unified Pension Scheme (UPS)

New Pension Scheme (NPS)

Old Pension Scheme (OPS)

Eligibility 

  • It will be effective from April 1, 2025 and applies to all Central government employees.
  • Launched in 2004 for providing retirement income to all citizens between 18 and 65 years.
  • Introduced in 1950s and applicable only to government employees. 

Assured Pension

  • 50% of average basic pay drawn over last 12 months prior to superannuation for a minimum qualifying service of 25 years.
  • It will be proportionate for a lesser service period (minimum service of 10 years).
  • Pension amount is not fixed as it is a market-linked scheme.
  • Central government employees will receive 50% of their last drawn salary. 
  • Provided fixed monthly income.

Minimum Pension

  • Rs.10,000 per month on superannuation after minimum 10 years of service.
  • Not Applicable 
  • Rs. 9000 per month

Family Pension

  • On demise, pension amounting 60% of employee’s pension  before demise.
  • In case, Government servant has opted for benefits under NPS, family would get benefits from his accumulated pension wealth under NPS.
  • Granted to widow / widower and where there is no widow / widower to children of a Government servant who entered in service in a pensionable establishment on or after 01/01/1964 but on or before 31.12.2003. 

Inflation Indexation

  • In form of Dearness Relief based on All India Consumer Price Index for Industrial Workers (AICPI-IW), similar to service employees.
  • Not available
  • Dearness relief, which adjusted pension for inflation, and offered a family pension to dependents.

Contribution

  • Employee contribution will not increase.
  • Government contribution increased from 14 to 18.5%.
  • Employees are required to contribute 10% of their salaries, while employers can contribute up to 14%
  • No employee contributions required.

Conclusion

UPS aims to combine the best aspects of both the OPS and NPS systems, and reintroduce an assured minimum pension. Further, UPS aims to improve the financial security and quality of life for government employees and their families.

  • Tags :
  • Unified Pension System
  • NPS
  • OPS
  • T. V. Somanathan Committee
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