Unified Pension Scheme Explained: From assured pension to inflation indexation - 5 salient features

In a major move to amplify retirement benefits for employees, the Cabinet led by Prime Minister Narendra Modi, announced the Unified Pension Scheme (UPS) for central government employees on Saturday. With the UPS, the government has attempted to combine the benefits of the Old Pension Scheme (OPS) with the existing National Pension Scheme (NPS).

The UPS, effective April 1, 2025, will provide assured pensions, family pensions, and minimum pensions to 23 lakh government employees. Here are the key benefits of the Unified Pension Scheme approved by the Union Cabinet last night.

Unified Pension Scheme: Key features

The UPS can be seen as an upgrade of the existing NPS for government employees, who will continue contributing 10% of their income to the scheme. However, the government's contribution has increased to 18.5%, against 14% currently. UPS provides its subscribers with an assured pension, inflation indexation, and family pension. Here are the salient features of the scheme.

Assured pension

UPS subscribers will get an assured pension under the scheme. They would be entitled to 50% of the average basic pay drawn over the last 12 months before superannuation. The feature is available for employees with at least 25 years of service. This pay is to be proportionate for lesser service periods up to a minimum of 10 years of service.

Assured family pension

The scheme also provides the benefit of assured family pension. Under this feature of the UPS, subscribers' family members will get 60% of the pension immediately after their demise.

Assured minimum pension for employees less than 25 yrs service

Employees retiring without completing twenty-five years of their service can also get pensions under the UPS. The scheme provides the assured minimum pension benefit of ₹10,000 per month on superannuation after a minimum of ten years of service.

Inflation indexation

The assured pension, family pension, and assured minimum pension provided to the UPS subscribers will be indexed to inflation. There will be Dearness Relief based on the All India Consumer Price Index for Industrial Workers (AICPI-IW) as in the case of serving employees, Information and Broadcasting Minister Ashwini Vaishnaw said on Saturday, August 25.

Lumpsum payment at superannuation

Under the UPS scheme, subscribers will also get the lump sum payment at superannuation in addition to gratuity 1/10th of monthly emoluments (pay + DA) as on the date of superannuation for every completed six months of service. Notably, the payment will not affect the assured pension amount.