Notification of the Unified Pension Scheme (UPS) for Government Personnel: Qualifications, What's New

The Unified Pension Scheme (UPS) for central government employees will go into effect on April 1, 2025, according to a notification from the Pension Fund Regulatory Authority of India (PFRDA).This implies that central government workers who are now employed and covered by the National Pension Scheme (NPS) as well as newly hired workers on or after April 1, 2025, will be enrolled under UPS, a news outlet reported.

What UPS Offers?

Prior to superannuation, UPS guarantees government workers a pension equal to 50% of their average basic pay earned throughout the previous 12 months. Superannuation is the term used to describe a company's pension plan, or the retirement plan that businesses provide to their workers. This allows tax benefit money to be deposited into each employee's account until they reach retirement age.

Eligibility for UPS

In India, 23 lakh central government employees have access to the NPS and UPS choices. This does not, however, apply to workers who have been fired, removed from service, or quit. Starting on April 1, 2025, all central government employees can access the enrolment and claim forms online at Protean CRA's official website. Submitting the forms in person is also an option for those who prefer.

The UPS, What's the Latest Developments?

According to a report, the entire rate of guaranteed payment with the UPS is 50% of 12 months' average basic pay just before superannuation for a minimum qualifying service of 25 years against a payout tied to market returns under the NPS. While the NPS went into effect on January 1, 2004, the UPS was approved by the Union Cabinet, led by Prime Minister Narendra Modi, on August 24, 2024. Employees must contribute 10% of their base pay and dearness allowance to the UPS, which is also contributory in nature. The central government, the employer, will contribute 18.5%. The market returns on that corpus, which is primarily invested in government debt, also affect the final payout.

How is UPS' Guaranteed Payout Determined?

The Finance Ministry's frequently asked questions provide specifics on how UPS calculates guaranteed payouts. Just prior to superannuation, the entire assured payout rate will be 50% of the average basic wage for 12 months. After at least 25 years of qualifying service, a full assured payout is due. If the qualifying service duration was less, a commensurate payment would be allowed. According to the standards set forth by the Finance Ministry, if superannuation occurs after ten years or more of qualifying service, a minimum guaranteed payout of INR 10,000 per month will be guaranteed, provided that contributions are credited on time and regularly and that no withdrawals are made. When an employee voluntarily retires after completing a minimum of 25 years of qualifying service, the guaranteed payout will start on the day the employee would have superannuated if he had stayed on the job.