Big pension reform! Unified Pension Scheme rolled out for central government employees

Unified Pension Scheme: The central government has implemented the new pension scheme - Unified Pension Scheme (UPS) - for its central employees from April 1. Under this new pension scheme, all central employees who have worked for at least 25 years can switch to UPS from April 1. Under UPS, employees are eligible to receive 50 percent of the average basic salary of the last 12 months before retirement as pension. About 2.3 million government employees will get financial security after retirement under this new pension scheme of the government.
 

Who is the UPS scheme designed for?

The UPS pension scheme is specifically designed for those who prefer a fixed and predictable income instead of a market-linked pension. Under the new scheme, employees who have worked for more than 10 years but less than 25 years will get a minimum pension of Rs.10,000 per month. The application and claim form for this scheme is available on the official website from April 1, 2025.

What is the hybrid model of UPS?

If the pensioner dies, his family will get 60 percent of the last pension as family pension. Apart from this, central government employees currently under the National Pension Scheme (NPS) can switch to UPS. This scheme is designed as a hybrid model, which includes features of both the Old Pension Scheme (OPS) and the National Pension Scheme (NPS).

Why was the UPS scheme needed?

While NPS provides market-based income without a fixed charge, UPS, a new scheme different from NPS, ensures a guaranteed pension amount. OPS was replaced by NPS in 2004. OPS provided a pension fully supported by the government with periodic dearness allowance revisions. UPS has been introduced in view of the growing concerns among government employees about the uncertainties of NPS. Many government employees demanded a more predictable pension system to ensure financial stability after retirement. The government aims to balance employee security with its financial responsibilities through this new scheme.

This move may also influence state governments to explore similar pension models. Those with more than 25 years of service will benefit more from the 50 percent guaranteed pension. Employees looking for a steady income after retirement may find UPS more desirable, while those comfortable with market fluctuations may prefer NPS for higher returns.

PFRDA divides employees into 3 categories

Last week, the Pension Fund Regulatory and Development Authority (PFRDA) officially announced the implementation of UPS under the NPS Regulations 2025.

These rules divide central government employees into three categories-

The first category includes central government employees who are in service on April 1, 2025 and are under NPS.

The second category includes new entrants to the Central Government Services who join service on or after April 1, 2025.

The third category includes those who were under NPS and retired on or before March 31, 2025 (voluntarily retired or retired under Fundamental Rule 56(j)) and legally married spouses are eligible for UPS or those who died before exercising the option for UPS.

Application and claim forms for all these categories of central government employees will be available online on the website https://npscra.nsdl.co.in from April 1, 2025.