Unified Pension Scheme: How Centre Has Balanced Fiscal Deficit and Employees’ Interests

The Union Cabinet, chaired by Prime Minister Narendra Modi last month approved the Unified Pension Scheme (UPS). The UPS will be implemented from April 1, 2025.

Unified Pension Scheme is the latest pension scheme for government employees. Under the UPS, there will be a provision of a fixed assured pension, unlike the New Pension Scheme (NPS) which does not promise a fixed pension amount.

Under the scheme, central government employees will receive fixed monthly pension after retirement — 50% of the average basic pay drawn over the last 12 months prior to superannuation for a minimum qualifying service of 25 years.

This scheme aims to streamline pension provisions and enhance financial security for beneficiaries. The UPS aims to provide a more stable and predictable retirement income compared to the existing New Pension Scheme (NPS). For those with shorter service periods, the pension will be proportionately adjusted, with a minimum service requirement of 10 years.

The UPS is set to benefit 23 lakh central government employees immediately. However, this number could increase to 90 lakh if state governments opt to join the scheme.

The pensions under the UPS will be subject to inflation indexation, ensuring that the real value of the pension is maintained.

There will be an option for the employees to opt between NPS and UPS. The benefits of the Unified Pension Scheme are applicable for those retired and retiring till March 31, 2025, with arrears.