Unified Pension Scheme: A New Era for Central Government Employees

The Unified Pension Scheme (UPS), notified by the Finance Ministry, assures a 50% pension of the last 12 months' average basic pay for Central Government employees under the National Pension System. The new scheme, effective April 2025, increases government contributions and is available as an option alongside the existing NPS.

The Finance Ministry has introduced the Unified Pension Scheme (UPS), guaranteeing an assured pension amounting to 50% of the average basic salary drawn over the last 12 months prior to retirement. This significant shift impacts Central Government employees participating in the National Pension System (NPS), offering them a choice to switch to UPS.

According to the official notification, the UPS option is set to be implemented from April 1, 2025. It allows employees with at least 25 years of qualifying service to receive a proportionate payout, with a guaranteed minimum monthly pension of Rs 10,000 for those retiring with ten years or more of service.

The Union Cabinet, led by Prime Minister Narendra Modi, has approved the UPS, increasing government contributions to 18.5%. Unlike the older pension scheme, which required no employee contributions, the UPS mandates a 10% contribution from employees while balancing market-based returns with a fixed payout mechanism.

(With inputs from agencies.)