UPS is being implemented by the Central Government.
Benefiting ~23 lakh Central Government employees.

The Central Government has approved the implementation of the Unified Pension Scheme (UPS), aimed at providing a more secure retirement for approximately 23 lakh central government employees. This scheme, set to commence from April 1, 2025, introduces an assured pension equivalent to 50% of the average basic pay drawn over the last 12 months before retirement, provided the employee has served for at least 25 years.

Additionally, the UPS includes provisions for an assured family pension, calculated at 60% of the deceased employee’s pension, enhancing financial support for dependents. An innovative feature of the UPS is the guaranteed minimum pension of Rs 10,000 per month for those retiring after a minimum of 10 years of service, addressing concerns of early retirees.

The scheme also incorporates inflation indexation, aligning with benefits for serving employees, ensuring the pension’s value against inflation. Employees will have the option to choose between the UPS and the existing New Pension Scheme (NPS), offering flexibility based on individual financial planning. The financial impact of this scheme is significant, with an estimated first-year cost increase of about Rs 6,250 crore, reflecting the government’s commitment to employee welfare.

While the UPS marks a return to a defined benefit pension system, it also opens the possibility for state governments to adopt similar schemes, potentially benefiting up to 90 lakh employees nationwide. This move has been interpreted as a response to long-standing demands from government employees and opposition parties for a more secure pension system.

The UPS, therefore, not only addresses employee security but also reintroduces fiscal challenges associated with defined benefit schemes, which had led to the introduction of the NPS in the first place.