NEW DELHI: The Cabinet on Saturday approved the Unified Pension Scheme (UPS) for 23 lakh central government employees. The UPS ensures that all central government employees receive 50 per cent of their last drawn salary from the past 12 months as pension who have served for 25 years or more.
Additionally, they will also be eligible for post-retirement inflation-linked increments in their pension amount.
Cabinet Secretary-designate TV Somanathan said that the new scheme will come into effect on April 1, 2025, and its benefits will be applicable to those retiring by March 31, 2025, including the payment of any arrears. The employees will have an option to opt for the UPS or NPS from the upcoming financial year.
Difference between UPS and NPS:
Guaranteed fixed pension amount
The retirees are entitled to a pension equal to 50 per cent of their average basic pay from the last 12 months of service, provide they have served for a minimum of 25 years under UPS. For those with 10 to 25 years of service, the pension is calculated proportionately based on their service duration.
The National Pension System (NPS) on the other hand calculates the pension based on the returns generated from contributions invested in debt and equity instruments. The NPS does not guarantee a fixed pension amount, as it is subject to market performance.
Minium pension
The Unified Pension Scheme offers a guaranteed minimum pension of ₹10,000 per month for employees who have served for at least 10 years, providing a basic level of financial security, particularly for those in lower salary brackets.
Individual contribution
The NPS requires a 10% contribution from the employee’s basic salary and 14% contribution from the government. Meanwhile, in Unified Pension Scheme, the government’s contribution will increase to 18.5% against 14% currently whereas, the employees contribution will remain 10% of their basic pay and DA.
Family security
Under the Unified Pension Scheme, if an employee passes away, their family is entitled to receive 60% of the employee’s pension, ensuring continued financial assistance for their dependents.
Meanwhile in NPS, the family’s pension would be determined by the accumulated corpus in the pension fund and the annuity plan selected at the time of retirement. NPS has a two-tier account structure:
Tier-1 Account: A mandatory pension account with tax benefits.
Tier-2 Account: An optional investment account linked to Tier-1, offering flexibility for withdrawals.
Lump sum payment at superannuation
A lump-sum amount on superannuation or gratuity will be paid to the employee calculated as per the old formulae-one tenth of the monthly emolument, pay plus dearness allowance as on retirement date and calculated on the basis of every six months of service.
Employees under NPS can withdraw a maximum of 60 per cent of the total corpus on retirement. The remaining 40 per cent is invested and returns on it are given as pension every month.
Eligibility
All central government employees are eligible for UPS. Meanwhile, NPS is available to both government and private employees except those in the armed forces
