The Finance Ministry has introduced the Unified Pension Scheme (UPS), providing a secure and assured pension option for Central Government employees. According to the recent notification, employees covered under the National Pension System (NPS) can now choose the UPS, which guarantees a pension of 50% of the average basic pay earned during the last 12 months before retirement. This scheme will be operational from April 1, 2025, and applies to government employees with at least 25 years of service.
In the event of voluntary retirement after 25 years of service, the employee will begin receiving the assured payout from the date they would have otherwise retired. If the employee passes away post-superannuation, their spouse will receive a family payout, which is 60% of the assured pension.
The government has also announced an increase in its contribution to the pension scheme. Starting in 2025, the government’s contribution will rise from 14% to 18.5%. However, employees will be required to contribute 10% of their basic salary and dearness allowance. While the UPS offers a guaranteed pension, the payout amount will still depend on market returns, which are linked to government debt.
With this change, employees who are currently under the NPS will have the choice to opt for the UPS, ensuring more financial security post-retirement. Furthermore, the Dearness Relief applicable to serving employees will also be extended to both the assured and family payouts.
