Unified Pension Scheme

Why in News?

The central government is bringing UPS (Unified Pension Scheme) instead of NPS (National Pension System) for employees.

Aim – UPS is a fund-based payout system that ensures government employees receive an assured payout after retirement.
It relies on the regular and timely accumulation of contributions from both the employee and the Central Government, which are invested to provide a monthly payout to the retiree.
Implemented from - April 1, 2025.
Eligibility - It is available to those central government employees who are already enrolled in the NPS and have opted for this new scheme.
Contributions

Old Pension Scheme	National Pension System	Unified Pension Scheme
It offered a defined benefit pension of 50% of the last drawn salary, fully funded by the government without requiring contributions from employees.	Employees contribute 10% of their basic pay and DA, and the government contributes 14%.	Employees will now contribute *10% of their salary to their pension*, just like the NPS, with the government contributing 18.5%.

Features – The following are the features of UPS,
Guaranteed pension - Pensioners will receive 50% of their average basic pay (from the last 12 months before retirement) as a pension, provided they have completed at least 25 years of service.
Those with a shorter service period (minimum 10 years) will receive a proportionate pension.
Family pension - In case of the employee’s death, the surviving spouse will receive 60% of the pension amount that the employee was receiving before death.
Minimum pension guarantee - The UPS guarantees a minimum pension of Rs 10,000 to those who retire after serving at least 10 years.
Inflation protection - The pension amount will be adjusted for inflation, just like Dearness Relief (DR) for serving employees, based on the All India Consumer Price Index for Industrial Workers (AICPIN-IW).
Lump sum payment at retirement - Upon retirement, employees will receive a one-time lump sum in addition to their gratuity.
This amount will be 1/10th of their last drawn monthly salary (Basic Pay + DA) for every six months of completed service. This benefit will not impact the assured pension amount.
The state governments can also adopt and implement the UPS scheme for state government employees. Maharashtra is the first state to implement UPS.

National Pension System will also remain available for those who do not want to switch to the UPS.