Govt staff under NPS alone can opt for Unified Pension Scheme

NEW DELHI: The just-announced Unified Pension Scheme for central government employees will be available only for those who are currently subscribers of the New Pension System (NPS), including retirees. The scheme is expected to benefit around 23,00,000 central government employees, with the potential to expand to 90,00,000 if state governments adopt the scheme.

The new scheme guarantees employees 50 per cent of their average basic pay over the last 12 months before retirement as a pension for a minimum qualifying service of 25 years against a market returns linked payout under the NPS.

According to the scheme approved by the Union Cabinet, the pension will be proportionate for a lesser service period of up to a minimum of 10 years. Also, assured pension of Rs 10,000 per month on superannuation after a minimum of 10 years of service.

The scheme has been brought out to address the concerns of government employees over NPS, which came into effect from January 1, 2004.

Under the old pension scheme (OPS), effective before January 2004, employees got 50 per cent of their last drawn basic pay as pension.

Unlike the old pension scheme, UPS is contributory in nature, wherein employees will be required to contribute 10 per cent of their basic salary and dearness allowance while the employer's contribution (the central government) will be 18.5 per cent.

Under the NPS, the employer contribution is 14 per cent, and the employee contribution is 10 per cent. However, the eventual payout depends on the market returns on that corpus, mostly invested in government debt.

Employees, under the OPS, were not required to make any contribution. They, however, contributed to the General Provident Fund (GPF). The accumulated amount, along with interest, was paid to the employee at the time of retirement.

As the NPS was less attractive than the OPS, several non-BJP-ruled states decided to go back to the old pension scheme, which offered a DA-linked benefit. This prompted the Centre to constitute a committee in April 2023, under former Finance Secretary and now Cabinet Secretary-designate TV Somanathan to suggest improvement in the NPS architecture.

Fulfilling the long pending demands of government employees ahead of assembly elections in Haryana and Jammu and Kashmir, the Union Cabinet on August 24 approved the UPS, which will provide assured pension to 23 lakh eligible central government employees.

Those opting for the UPS will not be able to switch back.

The UPS will put an additional burden of Rs 6,250 crore on the exchequer per year. The expenditure will vary every year according to variations in the number of employees.