The UPS will offer its employees the option to participate in the Unified Pension Scheme (UPS). Employees will have the option of joining the UPS or the National Pension System (NPS) in the future. A decision will be definitive once it has been made.

Prime Minister Narendra Modi’s Union Cabinet has taken a major step forward by approving the Unified Pension Scheme (UPS) for federal employees. This is a significant step in guaranteeing a stable pension for all national employees of the central government. Up to 9 million employees might possibly benefit from the program if state governments adopt the same structure as the 2.3 million central government employees who are expected to benefit from it.

Commencing on April 1, 2025, the UPS will provide a number of additional benefits, one of which is a guaranteed pension equivalent to 50% of the average basic salary earned in the final year prior to retirement. A minimum of 25 years of service is required for employees to be eligible. If a person has served for at least ten years, their pension will be commensurate with their level of service..

This scheme’s guarantee of a minimum pension of ₹10,000 per month for retirees with at least ten years of service is one of its primary features. Furthermore, the guaranteed family pension provision guarantees that 60% of the employee’s pension, as it was shortly prior to death, shall be awarded to the surviving spouse or family members.

This program’s approval by the Cabinet is a big step toward giving our government workers retirement financial stability. This plan incorporates an inflation index in addition to pension promises.

In a presentation after the Cabinet decision, the government said, “The benefits of the inflation index are included in this scheme, linking inflation relief to the All India Consumer Price Index (AICPI-IW) for industrial workers, aligning it with the provisions for serving employees.”

When they become superannuated, retirees will also get a lump sum payout plus a gratuity. For every six months of fully rendered service, this lump sum shall be computed as one-tenth of the monthly emoluments—including salary and dearness allowance—at the time of retirement. Interestingly, the guaranteed pension amount remains unchanged as a result of this payment.

One noteworthy feature of this system is that it covers those who have already retired as prior National Pension System (NPS) retirees. Arrears for the previous period, computed with interest at Public Provident Fund (PPF) rates, will be disbursed to these retirees.

Because of its flexible architecture, UPS enables both present and future workers to select between the NPS and the new program. But once a decision is made, it cannot be undone. Crucially, the new plan will not result in higher employee contributions. Rather, the government will support UPS implementation by increasing its contribution from 14% to 18.5%.

According to the statement, the federal government’s action creates the framework for state governments to implement a comparable system, possibly expanding the advantages of UPS to the numerous state government employees presently covered by NPS.

In a post on X, Modi said, “We take great pride in the hard work of all government employees who contribute significantly to national progress.The Unified Pension Scheme guarantees financial stability and respect for government employees, reflecting our dedication to their well-being and a secure future.
Bank of Baroda’s Chief Economist, Madan Sabnavis, commented, “This is a positive step towards harmonizing the old and new schemes. The guarantee is a key part of this scheme.”

Employees who meet the minimum qualifying service requirement of 25 years will be eligible for a guaranteed pension under the new plan, which is equal to 50% of the average basic pay received in the final 12 months prior to retirement. The Unified Pension Scheme (UPS), which intends to give government employees guaranteed pensions, family pensions, and minimum pensions, was approved by the Union Cabinet on Saturday under the direction of Prime Minister Narendra Modi.

Pension benefits will be awarded proportionately to an employee who has worked for more than ten years but less than twenty-five.

Furthermore, in the event of the retirement employee’s passing, a guaranteed family pension equal to 60% of the pension the employee was getting before to their passing will be awarded to their family. Additionally, after at least ten years of service, the new plan guarantees a minimum pension of ₹10,000 per month upon retirement.

Union Minister for Information and Broadcasting Ashwini Vaishnaw said that the pension will be based on an inflation index when he spoke to the media about the Cabinet decisions.