The Finance Ministry has introduced the Unified Pension Scheme (UPS) as a choice for central government employees under the National Pension System (NPS). This scheme is set to kick off on April 1, 2025, and is designed to offer guaranteed payouts, organized retirement benefits, and more flexibility for workers.
Eligibility for the Scheme
The Unified Pension Scheme (UPS) is available to central government employees enrolled in the National Pension System (NPS). It guarantees payouts under specific conditions. For instance, employees with over 10 years of service, those retiring without penalties under FR 56(j), and those opting for voluntary retirement after 25 years will qualify for these assured payouts. However, if an employee resigns, is dismissed, or removed from service, they won’t be eligible for this payout.
Ongoing Push for OPS Restoration
Last year, the central government rolled out the Unified Pension Scheme (UPS) for its employees, merging some features of the Old Pension Scheme (OPS) with the National Pension System (NPS). Despite this new scheme, employee unions are still pushing for the complete reinstatement of OPS. Under UPS, employees will need to contribute 10% of their basic salary, while the government will chip in 18.5%. In contrast, the OPS required no employee contribution, and pensions were set at 50% of the last drawn salary.
Many employees have expressed dissatisfaction with the UPS pension system, despite its protection and inflation linkage. They recall that under the OPS, there were no monthly contributions required from them, as the government covered the entire pension cost. This has led to ongoing discontent regarding the UPS. Experts suggest that the UPS has not adequately addressed the concerns of various employee groups, and numerous unions continue to advocate for the reinstatement of the OPS.
There are key distinctions among UPS, NPS, and OPS. In the UPS, employees contribute 10% of their basic salary, which is also the case for NPS, whereas OPS requires no employee contribution. The government contributes 18.5% to UPS, 14% to NPS, and fully funds the OPS. Both UPS and OPS link pension amounts to the last salary, while NPS bases its pension on market-linked returns.
Another notable difference is that UPS offers inflation protection tied to AICPI-IW, while OPS provides similar protection through DA hikes. NPS, however, does not include any inflation adjustments. Under UPS, families receive 60% of the employee’s pension, while in OPS, the entire pension is allocated to the family. The minimum pension in UPS is set at Rs 10,000 per month, whereas in NPS, it varies based on investments, and OPS does not guarantee a fixed minimum pension.