Unified Pension Scheme is going to be implemented for employees from April 1, know who will get the benefit
Unified Pension Scheme: As an alternative to the National Pension System, the federal government introduced the Unified Pension Scheme (UPS). The plan was formally unveiled on January 24. This plan will go into effect on April 1, 2025. Only government workers who are currently enrolled with NPS will be eligible for UPS. Government workers will be able to choose between UPS and NPS.
According to the Finance Ministry, central government workers who qualify for NPS may now choose to transfer to the Unified Pension Scheme. When the Old Pension Scheme (OPS) was in high demand, the UPS program was introduced. Retired workers received a pension equal to half of their pay under the Old Pension Scheme.
The Unified Pension Scheme (UPS): What is it?
Central workers of UPS will now get a fixed pension, equal to half of their average base pay for the previous 12 months. The employee must have worked for at least 25 years in order to be eligible for this pension. However, in the event of the employee’s death, the family will also get a fixed pension, which is equal to 60% of the employee’s pension. In addition, a minimum guaranteed pension would be provided, meaning that those who work for ten years will get a pension of at least Rs 10,000.
Pensions will rise in line with inflation
The Unified Pension Scheme now includes indexation as well. This implies that retired workers’ pensions will continue to rise in line with inflation. The pension will be increased in order to offset inflation. The All India Consumer Price Index for Industrial Workers (AICPI-W) would serve as the foundation for the calculation. In addition, a lump sum payment will be made upon retirement. This would help around 23 lakh workers.
Who is going to gain from this plan?
On Saturday, January 25, 2025, the government announced this single pension plan for central personnel covered by NPS. Such central government workers who fall under the National Pension Scheme (NPS) and choose UPS under it will be covered by the unified pension plan. Those that choose UPS will not be eligible for any further cash benefits, policy changes, or concessions.
What is the government going to contribute?
On August 24, 2024, Union Minister Ashwini Vaishnav announced UPS and provided all relevant details. Employees must contribute 10% of their base pay to the New Pension Scheme (NPS), while the government makes a 14% contribution. At the same time, this government contribution will be 18.5% of the employee’s base pay upon the introduction of UPS on April 1, 2025. This means that in the first year, the government treasury would bear an extra cost of Rs 6250 crore.
