Government Announces Unified Pension Scheme, Employees To Get 50% Of Average Basic Pay

The Central Government announced the UPS (Unified Pension Scheme) on Saturday, which aims to provide employees with a guaranteed pension, family pension and a minimum pension.

The scheme will be in effect from April 1, 2025.

The Union Cabinet approved the scheme today, ensuring a pension of 50% of the average basic salary from the last 12 months, provided the employee has at least 25 years of service. For those with less than 25 years, the pension amount will be adjusted accordingly.

The UPS also includes a family pension that is 60% of the employee’s pension right before their death. Additionally, it guarantees a minimum pension of ₹10,000 per month for employees who retire after at least 10 years of service.

Prime Minister Narendra Modi, who led the Cabinet meeting, highlighted that the UPS offers dignity and financial security to government employees. “We are grateful for the efforts of all government employees in driving national progress. The Unified Pension Scheme ensures their dignity and financial stability, reflecting our commitment to their well-being and future security,” he tweeted.

According to Railways Minister Ashwini Vaishnaw, about 2.3 million central government employees, currently covered by the National Pension System (NPS), will benefit from the UPS.

“The Union Cabinet has approved UPS today, providing a guaranteed pension for government employees. The scheme’s first component is a 50% assured pension, and the second is an assured family pension,” Vaishnaw stated.

“There will be an option for employees to choose between the NPS and UPS,” he added.

During a media briefing, the incoming Cabinet Secretary, TV Somanathan, said the new scheme would be effective from April 1, 2025. “The benefits of the UPS will apply to those retiring up to March 31, 2025, including arrears,” he mentioned.

What Will UPS Include?

The UPS includes a lump-sum payment upon retirement, in addition to gratuity and a portion of monthly earnings (salary + Dearness Allowance) for every six months of completed service. This payment will not affect the guaranteed pension amount for employees.

Last year, the finance ministry formed a committee led by Finance Secretary TV Somanathan to review the pension scheme for government employees and propose changes if needed, considering the current NPS structure.

Earlier, the government stated that there were no plans to reintroduce the Old Pension Scheme (OPS) for its employees, despite protests in states not governed by the BJP calling for its implementation.

Several states not under BJP rule have decided to return to the DA-linked OPS, and employee groups in other states have made similar demands.

The OPS is a defined benefit plan that provides half of the last drawn salary as a lifelong pension, with adjustments based on pay commission recommendations. In contrast, the NPS is a defined contribution plan where government employees contribute 10% of their basic salary, and the government contributes 14%.

Also Read: What You Need To Know About India’s New Unified Pension Scheme (UPS)