In a significant policy shift, Finance Secretary M. Nagaraju has announced the possible expansion of the Unified Pension Scheme (UPS) beyond central government employees. Launched on April 1, this pension plan ensures that retirees receive 50% of their last 12 months' average basic salary as pension. The initiative aims to strengthen financial security for a broader workforce.
During the inaugural International Pension Research Conference, organized by the Pension Fund Regulatory and Development Authority (PFRDA) and IIM Ahmedabad, Finance Secretary Nagaraju expressed optimism about extending UPS benefits to other stakeholders under the National Pension System (NPS). He emphasized that NPS has become a robust retirement savings mechanism, reflecting growing public trust in its asset management and expanding customer base.
Defined Contribution with Defined Benefits – Unlike traditional pension schemes, UPS offers a unique model where contributions lead to a guaranteed pension payout.
Guaranteed Pension – Retirees will receive 50% of their last year’s average basic salary as a pension.
Inflation Protection – The scheme includes provisions under Dearness Relief (DR) to adjust pension benefits based on inflation.
Nagaraju stated that the scheme’s implementation will pave the way for similar models catering to various workforce segments. He also highlighted the budget announcement regarding the establishment of a regulatory and developmental platform for pension products.
The Indian government is committed to broadening pension coverage, particularly for gig workers, informal sector employees, and marginalized communities. To achieve this, authorities are working on strategies to enhance pension inclusion, ensuring:
Financial Stability – Establishing sustainable pension mechanisms for long-term financial security.
Adequate Pension Benefits – Ensuring retirees receive sufficient financial support post-retirement.
Universal Pension System – Exploring models that offer retirement security to all citizens.
Despite progress, pension savings in India remain significantly lower than in emerging and OECD economies, where pension assets exceed 80% of GDP. In contrast, India’s pension assets stand at just 17% of GDP, indicating a substantial growth opportunity in the retirement planning sector.
The Unified Pension Scheme marks a crucial step toward securing financial stability for retirees while setting the foundation for an inclusive pension framework benefiting a wider population.
