The Finance Ministry has notified Unified Pension Scheme (UPS) as an option under National Pension System (NPS). It will come into effect from April 1 this year and has potential to benefit 23 lakh employees.
This will be available for government servants who have joined the service on or after January 1, 2004 or who will be joining now onwards with the facility of one-time switch from NPS to UPS. It will also be available on an optional basis to State Governments for their employee. Government has already said that the scheme will have five major benefits — assured pension; assured family pension; assured minimum pension; inflation indexation and lumpsum payment at superannuation in addition to gratuity and all in one comprehensive package.
Under the new scheme, while the government contribution will be raised to 18.5 per cent from 14 per cent, there will be no change in the employee contribution at 10 per cent of basic pay plus DA (Dearness Allowance).
According to the notification, the scheme will be available to an employee superannuating after qualifying service of ten years. In case of voluntary retirement, the minimum qualifying service period would be 25 years. The scheme will also be available to employees who have been retired by the government under fundamental rules. “Assured Payout shall not be available in case of removal or dismissal from service or resignation of the employee. In such cases, the Unified Pension Scheme option shall not apply,” the notification said.
Full assured payout
Under the scheme, the rate of full assured payout will be at 50 per cent of twelve monthly average basic pay, immediately prior to superannuation. Full assured payout is payable after a minimum 25 years of qualifying service. In case of lesser qualifying service period, proportionate payout would be admissible. A minimum guaranteed payout of ₹10,000 per month shall be assured in case superannuation is after ten years or more of qualifying service. In cases of voluntary retirement after a minimum 25 years of qualifying service, assured payout will commence from the date on which the employee would have superannuated, if he had continued in service.
In case of death of the payout holder after superannuation, family payout at 60 per cent of the payout admissible to the payout holder, immediately before his demise, will be assured to the legally wedded spouse Dearness Relief will be available on the assured payout and family payout, as the case may be. The Dearness Relief will be worked out in the same manner as Dearness Allowance applicable to serving employees. Dearness Relief will be payable only when payout commences. A lump sum payment will be allowed on superannuation @10 per cent of monthly emoluments (basic pay + Dearness Allowance) for every completed six months of qualifying service. This lump sum payment will not affect the quantum of assured payout.
The assured minimum pension under UPS will be based on ‘Default mode of Investment’ options for subscribers. Also, under the new scheme, the entire pension corpus will be divided into two funds. First will be an individual pension fund to which the employee contribution and matching government contribution will be credited and amount will be invested as per the choice of investment made by the individual employee. Second will be a separate pool corpus with additional government contribution alone (8.5 per cent of basic and DA of all employees) and invested separately.
