NEWS

• Central government employees can opt for the Unified Pension Scheme (UPS) under the National Pension System (NPS) till September 30, 2025.
• UPS was approved by the Cabinet in August 2024 and came into effect on April 1, 2025.
• The move aims to address long-standing concerns over the Old Pension Scheme (OPS) and the market-linked NPS.

HIGHLIGHTS

UPS vs NPS: Key Differences

• Optional vs Mandatory: UPS is optional; NPS is mandatory for employees joining post-Jan 1, 2004.
• Assured Pension: UPS guarantees 50% of the average last-year basic pay for at least 25 years of service; NPS returns depend on the accumulated corpus.
• Contribution: UPS requires 10% each from employee and employer, while NPS contributions are 10% by employee and 14% by employer.
• Lump-sum & Family Pension: UPS offers a lump-sum payout (1/10th of pay for each six months of service) and 60% family pension; NPS does not provide these guarantees.
• Minimum Payout: UPS ensures Rs 10,000/month after 10 years of service.

Objective and Significance

• UPS seeks to combine assurance of OPS with market-linked features of NPS.
• Addresses inter-generational equity issues created by the “pay-as-you-go” OPS model.

Operational Rules

• Employees can revert to NPS up to one year before superannuation or three months before opting for Voluntary Retirement Scheme (VRS).
• Dismissed employees are ineligible for assured payouts.
• Pension calculations include inflation adjustment using All India Consumer Price Index for Industrial Workers.

Context and Reforms

• OPS (pre-2004) guaranteed fixed pensions; NPS (post-2004) is market-linked and required contributions.
• Persistent demand for OPS revival led to UPS announcement, based on recommendations of a committee chaired by former Finance Secretary T.V. Somanathan.