The Unified Pension Scheme (UPS) for Central government employees will come into force from 1 April 2025. The government had decided to introduce UPS as an enhanced option under the National Pension System (NPS) for the employees of the Central government who are covered under the same. In a notification issued on Saturday, the government clarified once a government employee – existing or future – opts for the Unified Pension Scheme, he or she won’t be allowed to go back to the NPS. State governments can also implement the scheme for their employees. As on 31 March, 2024, 26 lakh central government and 66 lakh state government employees were making contributions to NPS. Of the 11.7 lakh corpus under NPS, state and central government employees accounted for Rs 9 lakh crore.The scheme guarantees an assured monthly payout of 50% of twelve monthly average basic pay, immediately prior to retirement to those employees, who have a minimum 25 years of service.The scheme also guarantees a minimum monthly pension of Rs 10,000 for those who have less than 25 years of service but have completed 10 years or more. In cases of voluntary retirement after a minimum 25 years, the assured payout will start from the date on which the employee would have retired, if he had continued in service. In the event of the pensioner’s death, his family will receive 60% of the pension amount that was being disbursed at the time of the pensioner’s passing.The assured pension, family pension, and minimum pension will be adjusted for inflation. This means that the payments will include dearness relief, which is based on the All-India Consumer Price Index for Industrial Workers (AICPI-IW), just like for current government employees. A lump sum amount will be given at the time of superannuation, in addition to gratuity. Employees will receive 1/10th of their monthly salary (including pay and dearness allowance) for every six months of completed service at the time of retirement. This lump-sum payment will not affect the amount of the guaranteed pension.The Unified Pension Scheme is being launched as an improvement over the New Pension System by guaranteeing a pension of 50% of twelve monthly average basic pay, and providing a shield against inflation.The UPS will have two funds — an individual corpus with employee contribution and matching Central Government contribution; and a pool corpus with additional Central Government contribution.The contribution of employees will be 10% of (basic pay + Dearness Allowance). The government will match this contribution. The government will provide an additional contribution of an estimated 8.5% of (basic pay + Dearness Allowance) of all employees who have chosen the Unified Pension Scheme option, to the pool corpus.An employee can opt among investment choices provided for the individual corpus alone. If he does not choose one, a ‘default’ investment option — as decided by the Pension Fund Regulatory and Development Authority (PFRDA) from time to time – will apply.
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