If you are an employee of the central government, then this news is very important for you. The next year, from 1 April 2025, the central government is going to implement a new pension system. The Union Finance Minister announced the Unified Pension Scheme (UPS), which would be a better option for the current National Pension System (NPS). The objective of this scheme is to provide more financial security to government employees after retirement.
What is Unified Pension Scheme (UPS)?
Unified pension scheme is a new pension system, which has been made more stable and reliable than NPS. Under this scheme, employees will get 50% of their final salary as pension, which will strengthen their post -retirement financial position.
NPS vs. UPS – What is a big change?
| features | NPS (national pension system) | UPS (Unified Pension Scheme) |
|---|---|---|
| Pension basis | Market based | 50% guarantee of final salary |
| Pension amount | Dependent on market status | Fixed pension |
| Employee contribution | 10% | 10% (not change) |
| Government’s contribution | 14% | Increased 18.5% |
| Minimum service | no guarantee | At least 10 years of service is necessary |
Why is UPS special?
- Guaranteed Pension: Under UPS, market conditions will not affect and 50% of the final salary will definitely be received as pension.
- Increased government contribution: The government has increased its contribution from 14% to 18.5%, which will give more benefits to the employees.
- Financial stability: The scheme will help reduce the economic concerns after retirement.
Who can benefit UPS?
- Currently all central government employees under NPS.
- Those who want to leave NPS and switch to the new UPS system.
- Employees who have completed at least 10 years of service will be eligible for UPS.
What is the reason for the implementation of Unified Pension Scheme?
In April 2023, a panel constituted under the chairmanship of Finance Secretary TV Somathan recommended the reorganization of NPS. The panel found that many government employees were not satisfied with NPS, as it had high market risk and there was no guarantee of pension amount. Keeping this in mind, the government designed the UPS, giving employees more financial stability after retirement.
