By: Aditya Ahuja
The central government on Saturday approved the Unified Pension Scheme (UPS) for its employees, a move anticipated to impact 23 lakh workers by enhancing their financial security and stability post-retirement.
Key Features of the Unified Pension Scheme (UPS):
Assured Pension for Long-Term Service
Employees with a minimum of 25 years of service will be entitled to an assured pension amounting to 50% of their average basic pay over the last 12 months before retirement. Those with less than 25 years of service will receive a proportionate pension, with the minimum qualifying service set at 10 years.
Family Pension for Spouse
In the unfortunate event of an employee’s death, their spouse will receive a family pension, guaranteed at 60% of the pension that the employee was receiving before their passing.
Minimum Pension Guarantee
Employees with at least 10 years of service are assured a minimum pension of ₹10,000 per month upon retirement.
Inflation Indexation
Both the assured pension and family pension will be adjusted for inflation, ensuring that pension amounts keep pace with rising living costs.
Dearness Relief for Retirees
Similar to serving employees, retirees under the UPS will receive Dearness Relief based on the All India Consumer Price Index for Industrial Workers (AICPI-IW).
Lump Sum Payment on Retirement
In addition to gratuity, employees will receive a lump sum payment upon retirement. This payment will be equivalent to 1/10th of the employee’s monthly emoluments (including pay and Dearness Allowance) as of the date of retirement, for every completed six months of service. Importantly, this lump sum will not reduce the assured pension amount.
Prime Minister’s Statement on UPS
“We are proud of the hard work of all government employees who contribute significantly to national progress. The Unified Pension Scheme ensures dignity and financial security for government employees, aligning with our commitment to their well-being and a secure future,” stated Prime Minister Narendra Modi in a post on X.
Potential Expansion and Context
The UPS is poised to benefit 23 lakh central government employees immediately. However, this number could potentially increase to 90 lakh if state governments choose to adopt the scheme, extending its benefits to a broader range of government employees across India.
This announcement comes in the wake of several non-BJP states deciding to revert to the DA-linked Old Pension Scheme (OPS) and growing demands from employee organizations in other states for similar action.
Comparison with the National Pension Scheme (NPS)
The National Pension Scheme (NPS) has been in effect for all government employees, except those in the armed forces, who joined the central government on or after January 1, 2004. Most state and Union Territory governments have also implemented the NPS for their new employees.
Concerns Over the Old Pension Scheme (OPS)
Under the OPS, retired government employees received 50% of their last drawn salary as a monthly pension, with the amount increasing in line with DA rates. However, the OPS is considered fiscally unsustainable as it is non-contributory, leading to an increasing burden on the exchequer.