The Government of India has notified a new Unified Pension Scheme (UPS) as an option under the existing National Pension System (NPS) for Central Government employees. This scheme, effective from 1 April 2025, blends the features of NPS with guaranteed pension benefits. Below is a simplified explanation of the scheme, structured around common questions.
What is the Unified Pension Scheme (UPS)?
UPS is a pension option available to Central Government employees who are currently under NPS. Employees can choose to switch to UPS, but once opted, the choice is final. It guarantees a minimum pension and provides family pension, dearness relief, and lump‑sum benefits, unlike NPS which depends entirely on market returns.
Who is eligible?
- Employees under NPS who opt for UPS.
- Pension is available only if the employee has at least 10 years of qualifying service.
- Full pension (50% of last 12 months’ average basic pay) requires 25 years of service.
- Resignation, dismissal, or removal disqualifies an employee from pension benefits.
What are the benefits?
- Guaranteed Pension:
- 50% of last 12 months’ average basic pay after 25 years of service.
- Pro‑rata pension for service between 10–25 years.
- Minimum ₹10,000/month if service ≥10 years.
- Family Pension: 60% of pension to spouse after pensioner’s death.
- Dearness Relief (DR): Same as DA for serving employees, applicable once pension starts.
- Lump Sum: 10% of (Basic + DA) for every completed 6 months of service, payable at superannuation.
- Corpus Contributions:
- Employee: 10% of Basic + DA.
- Govt: 10% of Basic + DA (to individual corpus).
- Govt extra: 8.5% of Basic + DA (to pool corpus).
Q1: “So if someone resigns after 20 years of service, what will be the pension?”
None. The Gazette clearly states that resignation, dismissal, or removal disqualifies an employee from assured pension. They can only withdraw their corpus, but no monthly pension is guaranteed.
Q2: “So what if voluntary retirement?”
Voluntary retirement benefits apply only if the employee has 25 years of service. Pension starts not immediately but from the age of superannuation. For example, if someone retires voluntarily at 52 with 28 years of service, pension begins at 60, calculated at 50% of last pay.
Q3: “Suppose someone has only 23 years of service then how to calculate the pension?”
With 23 years (276 months), pension is pro‑rata:
\[
\text{Pension} = \frac{(\text{Average Basic Pay}/2) \times 276}{300}
\]
If average basic pay = ₹50,000, pension = ₹23,000/month + DR. Family pension = ₹13,800/month + DR.
Q4: “Suppose someone is already in NPS with 10 years of service then switch to UPS – calculate the impact with examples.”
- At 10 years service: Pension = minimum ₹10,000/month + DR.
- At 15 years service: Pension ≈ ₹13,500/month + DR (if average pay ₹45,000).
- At 23 years service: Pension ≈ ₹23,000/month + DR (if average pay ₹50,000).
Switching ensures guaranteed pension, unlike NPS where annuity depends on market rates.
Q5: “Suppose someone has now completed 10 years of service and wants to switch to UPS from NPS but also has 13 years of service left – then tell.”
Total service = 23 years. Pension is pro‑rata.
Example: Average pay ₹50,000 → Pension = ₹23,000/month + DR.
This is safer than NPS, which may yield lower annuity depending on market conditions.
✨ Key Takeaways
- Resignation = No pension.
- Voluntary retirement <25 years = Not eligible.
- 10–25 years service = Pro‑rata pension (minimum ₹10,000).
- ≥25 years service = Full pension = 50% of last pay.
- UPS provides certainty and security compared to NPS’s market‑linked annuity.
