Unified Pension Scheme: Since 1 April 2025, a major change in pension system has come into force in India. The Pension Fund Regulatory and Development Authority (PFRDA) had notified the Unified Pension Scheme (UPS) in March and now the scheme has started formally. This scheme is specially designed for those central employees who want a certain and safe income after retirement. Employees who are already registered under the National Pension System (NPS). They now have the option to choose one of the UPS or NPS.
The central government declared UPS as an alternative to NPS on 24 January 2025. This scheme has come into force from 1 April 2025 and the central employees under NPS will get the benefit. Employees can now choose one of the UPS or NPS according to their needs. However, employees choosing UPS will not be entitled to any other policy exemption or additional financial benefit. About 23 lakh central employees are expected to benefit from this scheme.
Unified Pension Scheme (UPS) guarantees a certain pension to employees after retirement.
Fixed pension: Employees serving 25 years or more will get 50% pension of the average basic salary of 12 months before their retirement.
Family Pension: On the death of the employee, his family will get 60% of his pension.
Minimum pension: Guarantee of at least Rs 10,000 monthly pension to employees with 10 years of service.
Inflation adjustment: Inflation relief (DA) will be added to the pension based on All India Consumer Price Index for Industrial Workers (AICPI-W).
amount: Employees will also be given a lump sum amount on retirement.
Contribution to NPS: Employees contributed 10% of their basic salary and 14% of the government.
Changes in UPS: Now the contribution of the government has increased to 18.5%. While the employee's contribution will be only 10%. In the first year, the government exchequer will have an additional burden of Rs 6,250 crore in the first year.
The National Pension System (NPS) started in 2004. When the government closed the old pension scheme (OPS). This is a market based scheme. In which the amount of pension depends on the return of investment. It is portable i.e. it can be operated from anywhere in the country. Since 2009 it has also been open to private sector employees. 60% of the amount can be extracted outright on retirement, regular pension is received from the remaining 40%.
Choose UPS if: You want to get rid of fixed income and risk after retirement. This is better for employees who are offering long service (25+ years) and prioritize stability. Inflation adjustment and family pension make it more attractive.
Choose if NPS: You can take market risk and expect more returns potentially. This scheme provides flexibility and portability, which is beneficial for employees thinking of going into the private sector.
