The recently announced Unified Pension Scheme (UPS) for Central Government employees will be available only to those who are currently subscribers of the New Pension Scheme (NPS) and this includes retired employees as well.
Under the UPS scheme, employees are guaranteed 50 percent of their average basic salary as pension in the last 12 months before retirement if they have a minimum qualifying service of 25 years. The amount received in NPS depends on the returns from the market.
How will the pension be decided
The Union Cabinet has recently approved the UPS scheme. In this scheme, pension will be decided on a proportionate basis for a minimum service period of 10 years. Also, a pension of Rs 10,000 per month has also been ensured on retirement after a minimum service of 10 years. This scheme has been brought to address the concerns of government employees related to NPS. NPS was implemented from January 1, 2004. Earlier, under the Old Pension Scheme (OPS), employees used to get 50 percent of their last basic salary as pension.
Who contributes how much to the pension
However, unlike the old pension scheme, UPS is a contributory scheme in which employees will have to contribute 10 per cent of their basic salary and dearness allowance. The employer’s (central government) contribution will be 18.5 per cent. Under NPS, the employer’s contribution has been kept at 14 per cent while the employee’s contribution is fixed at 10 per cent. Despite this, the final payment to the employee under NPS depends on the market return of the fund, which is mostly invested in government loans.
This was the arrangement in OPS
Under the OPS, which was in force till December 2003, government employees were not required to make any contribution. However, they used to contribute to the General Provident Fund (GPF). The deposited amount was given at the time of retirement of the employee along with interest. Compared to OPS, NPS did not become a center of attraction among the employees. In such a situation, some non-BJP ruled states decided to go back to the old pension scheme, which provided benefits related to dearness allowance (DA).
Also Read: Maximum and Minimum pension calculation under UPS and 8th Pay Commission: know how much pension you will get
Many states had implemented OPS
Amid growing pressure to implement OPS, the Centre had in April 2023 constituted a committee headed by former finance secretary and current Cabinet Secretary-designate TV Somanathan to suggest improvements in the NPS structure. The Union Cabinet approved UPS on August 24, meeting the long-pending demands of government employees ahead of assembly elections in some states.
Only 23 lakh people will get UPS
UPS will provide assured pension to 23 lakh eligible central government employees. However, those who opt for UPS will not be able to go back to NPS. UPS is expected to put an additional burden of Rs 6,250 crore on the government treasury every year. However, due to changes in the number of employees, the expenditure on this will vary every year. Apart from this, employees retiring before March 31, 2025 are to be paid an outstanding amount of Rs 800 crore under NPS. If these retired employees opt for UPS, they will get the outstanding amount.
UPS can be available for Rs 90 lakh
Information and Broadcasting Minister Ashwini Vaishnav on Sunday said on the social media platform X that 23 lakh central government employees will benefit from UPS. He said that if the states also adopt the UPS framework, then a total of more than 90 lakh government employees who are currently part of NPS will benefit from it. The Maharashtra government, which is going to face assembly elections later this year, has announced the adoption of UPS for its employees. It has become the first state in the country to do so.
Labor union opinion on UPS
RSS-affiliated Bharatiya Mazdoor Sangh (BMS) said that by introducing UPS, the government has tried to overcome the shortcomings of NPS, but there are still some issues compared to OPS. BMS will decide its future course of action only after a detailed study of UPS after it is notified. Trade union All India Trade Union Congress (AITUC) said that it is just an extension of the existing NPS. It feared that there will be many anomalies in UPS after its implementation. It said that it will continue to fight for the restoration of non-contributory OPS.
What does ICRA agency say
Aditi Nair, chief economist at rating agency ICRA, said the provision of assured pension would increase the government’s committed expenditure in the future but reduce uncertainty for employees. Dorothy Thomas, partner at Shardul Amarchand Mangaldas & Co, said UPS represents a thoughtful approach to long-term social security, which addresses concerns about the adequacy and sustainability of pension benefits in a rapidly changing economic scenario.
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