A National Pension System (NPS) Government Employee, who retires on or before March 31, 2025 can opt for Unified Pensions Scheme (UPS). said Finance Ministry in a notification dated January 24. UPS is to be operationalised from April 1, 2025.
The scheme will not be available for employees who were removed or dismissed from service or have resigned from service.
“The provisions of Unified Pension Scheme will also be applicable, mutatis mutandis to past retirees of NPS, who have superannuated before the date of operationalising of Unified Pension Scheme. Such superannuated employees will be paid arrears for the past period along with interest as per Public Provident Fund rates. The monthly top-up amount for such superannuated employees, to be determined by the Pension Fund Regulatory and Development Authority (PFRDA), will be paid after adjusting the withdrawals made by, and annuities paid to, them,” the notification said.
NPS (Previously known as New Pension Scheme) is for a government employees who joined service on or after January 1, 2004. The scheme started with officers and employees of Central Government and then various State Governments opted for it. This is defined contribution scheme under which an employee contributes 10 per cent of basic and dearness allowance, while government’s share is up to 14 per cent.
Under UPS, while an employee’s contribution will remain 10 per cent, government’s contribution will be 18.5 per cent. The pension corpus will be divided into two funds. First will be an individual pension fund to which the employee contribution (10 per cent of basic+DA) 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.
According to officials, assured pension will be based on the ‘default mode’ of investment pattern notified by PFRDA (Pension Fund Regulatory and Development Authority) considering full annuitiszation of individual pension corpus.
Apart from the default option, a 2019 notification prescribes three other options for investment choices. Government employees who prefer a fixed return with minimum amount of risk may be given an option to invest 100 per cent of the funds in government securities (Scheme G). Those who prefer higher returns may be given the options of the two-life cycle-based schemes – Conservative Life Cycle Fund with maximum exposure to equity capped at 25 per cent and Moderate Life Cycle Fund with maximum exposure to equity capped at 50 per cent.
Under the UPS, employees will have the option to choose the investment option for first fund only, while the investment decisions for the second fund will solely rest with Central Government, the notification said.
As many as 23 lakh central government employees can benefit from UPS. The rollout of UPS will entail an additional outgo of ₹6,250 crore for the Centre in first year and arrears of ₹800 crore in first year. Also, as many as 90 lakh State government employees can potentially benefit from UPS if the States decides to switch from NPS to UPS for their employees.
- Read also: Government notifies Unified Pension Scheme, to be effective from April 1
UPS
– Assured pension: 50% of the average basic pay drawn over the last 12 months prior to superannuation for a minimum qualifying service of 25 years. Proportionate for lesser service period up to a minimum of 10 years of service.
– Assured family pension: @60% of pension of the employee immediately before her/his demise.
– Assured minimum pension: ₹10K/month on superannuation after minimum 10 years of service
– Dearness relief on assured pension/family pension/minimum pension
– Lumpsum payment at superannuation in addition to gratuity, this will not reduce the quantum of assured pension
