In a significant enhancement of pension benefits for central government employees, the Union Cabinet on Saturday approved the Unified Pension Scheme (UPS) with assured pension of 50 per cent of the average basic salary earned during the last 12 months before retirement, for a minimum qualifying service of 25 years.
The scheme will take effect at the beginning of the next fiscal year, which starts on April 1, and will benefit more than 2.3 million central government employees, according to the government. The amount would be proportional to a shorter period of service, up to a minimum of 10 years of service.
“We are proud of the hard work of all government employees who contribute significantly to national progress. The Unified Pension Scheme ensures dignity and financial security for government employees, in line with our commitment to their well-being and secure future,” Prime Minister Narendra Modi said on social media platform X.
We are proud of the hard work of all government employees who contribute significantly to national progress. The Unified Pension System ensures the dignity and financial security of government employees, in line with our commitment to their well-being and a secure future.…
– Narendra Modi (@narendramodi) August 24, 2024
The Cabinet has decided that UPS will be available as an option for central government employees. Existing and future employees will also have the option of joining either the New Pension Scheme (NPS) or the UPS. The choice, once exercised, will be final, the government has said.
The government contribution has also been increased from 14 to 18.5 percent. “The employee contribution will not be increased. The government will provide an additional contribution to implement the UPS,” a presentation by the expenditure department said.
The government will prepare the support mechanism and the legal, regulatory and accounting changes necessary for the implementation of the plan. “If it is also adopted by state governments, [it] “This programme can benefit over 9 million government employees who are currently receiving NPS,” the Centre said, stressing that the scheme has been designed to be adopted by state governments.
The government said the UPS provisions would also apply to earlier pensioners of the New Pension Scheme. “Arrears of the previous period will be paid with interest at PPF rates,” the department of expenditure’s presentation said.
According to the government, the default expense will be Rs 800 crore. The annual cost increase will be around Rs 6,250 crore in the first year.
The plan will also have two other components: family pension and minimum guaranteed pension.
Under the assured family pension component of the scheme, the family members of the employee will receive 60 per cent of the immediate pension after his death. Under the assured minimum pension component, employees will receive a minimum of Rs 10,000 as retirement benefit after a minimum of 10 years of service.
The new scheme will also have inflation indexation. Dearness relief will be provided in all three components based on the All India Consumer Price Index for Industrial Workers (AICPI-W), as in the case of in-service employees. The scheme will also provide a one-time payment on retirement, in addition to gratuity and 1/10th of the monthly emolument (salary + DA) on the date of retirement for every six months of service completed.
This payment is not expected to reduce the amount of the guaranteed pension.
In March 2023, the Narendra Modi government set up a committee led by former Finance Secretary TV Somanathan to explore ways to enhance pension benefits under the NPS without reverting to the non-contributory Old Pension System (OPS), which has been deemed fiscally unsustainable.
First published: August 24, 2024 | 10:08 PM IS
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