Approves Unified Pension Scheme for Government Employees

Context:

To enhance retirement benefits for government employees, the Union Cabinet on Saturday approved the Unified Pension Scheme (UPS).

• This new scheme is set to benefit approximately 23 lakh government employees and will serve as an alternative to the existing National Pension System (NPS).

About:

• One of the most notable features of the UPS is the assured pension.
• Employees who have completed a minimum qualifying service of 25 years will be entitled to a pension that is 50% of the average basic pay drawn over the last 12 months prior to superannuation.
• The UPS also introduces an assured family pension. In the unfortunate event of an employee’s death, their family will receive a pension at the rate of 60% of the employee’s pension
• A minimum pension of ₹10,000 for those who worked for at least 10 years.
• the UPS includes provisions for inflation indexation, which protects against inflation
• This provision ensures a stable and substantial income for retirees.
• Current subscribers to the National Pension System will have the option to switch to the UPS from the next financial year.
• The scheme is based on the recommendations of a committee led by former Finance Secretary and Cabinet Secretary-designate T.V. Somanathan.
• The Centre’s share towards the scheme was increased from 14% under the NPS to 18.5%, which will ensure government employees dignity and financial security.
• Employees to contribute 10% of their salary.

Transition from NPS to UPS:

National Pension System (NPS): Originally implemented for employees joining on or after January 1, 2004, the NPS linked pension payouts to the accumulated contributions from both the government and employees, invested in market-linked securities.

Switch option: Employees who joined after 2004, including retirees, have the option to switch from NPS to UPS, which is expected to be beneficial for approximately 99% of NPS members.