Note4Students
From UPSC perspective, the following things are important :
Prelims level: Unified Pension Scheme
Why in the News?
The Finance Ministry has announced the operationalization of the Unified Pension Scheme (UPS) for Central Government employees under the National Pension System (NPS), effective from April 1, 2025.
Salient features of the Unified Pension Scheme (UPS)
- Effective from April 1, 2025.
- Eligibility: Applicable to Central Government employees with at least 10 years of service.
- Assured Pension:
- 50% of average basic pay over the last 12 months before retirement for employees with 25+ years of service.
- Proportionate benefits for employees with 10–25 years of service.
- Assured Minimum Pension: ₹10,000 per month for eligible employees.
- Assured Family Pension: 60% of the pension drawn by the employee prior to their death.
- Inflation Protection:
- Pensions indexed to inflation.
- Dearness Relief (DR) linked to the All India Consumer Price Index for Industrial Workers (AICPI-IW).
- Government Contribution: Increased to 18.5% of basic pay and DA (up from 14% under NPS).
- Employee Contribution: 10% of basic pay and DA (same as NPS).
- Lump Sum Payment:
- One-tenth of last drawn pay (including DA) for every six months of completed service, in addition to gratuity.
- Choice of Scheme: Employees can choose between UPS and NPS starting from the upcoming financial year, with the choice being final once made.
- Beneficiaries: Initially benefits 23 lakh Central Government employees, with potential extension to 90 lakh employees if adopted by state governments.
Differences between UPS, NPS and OPS (Old Pension Scheme)
| Unified Pension Scheme (UPS) | National Pension Scheme (NPS) | Old Pension Scheme (OPS) | |
| Pension Amount | 50% of average basic pay over last 12 months; proportional for service <25 years. | Market-linked, dependent on contributions and market performance. | 50% of last drawn salary, increases with DA hikes. |
| Family Pension | 60% of employee’s pension after their death. | Based on accumulated corpus and annuity plans. | Continued benefits to family after retiree’s death. |
| Employee Contribution | 10% of basic salary. | 10% of basic salary. | None; entirely government-funded. |
| Government Contribution | 18.5% of basic salary. | 14% of basic salary. | Entire cost borne by the government. |
| Inflation Indexation | Linked to AICPI-IW. | Not applicable (market-linked returns). | Indexed; pension increases with DA hikes. |
PYQ:[2017] Who among the following can join the National Pension System (NPS)? (a) Resident Indian citizens only (b) Persons of age from 21 to 55 only (c) All State Government employees joining the services after the date of notification by the respective State Governments (d) All Central Government employees including those of Armed Forces joining the services on or after 1st April, 2004 |
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