UPS rollout: Center may notify Unified Pension Scheme rules by October 15. Here’s what we know

The government is expected to announce the Unified Pension Scheme (UPS) rules by October 15, 2024, with the scheme set to go live on April 1, 2025. Cabinet Secretary TV Somanathan is leading the coordination efforts among different departments to ensure a seamless implementation of the UPS, the Economic Times reported.

The Department of Personnel & Training will assess employee preferences, while the Department of Administration Reforms and Personnel Grievances will develop the rule book for the scheme. The Pension Fund Regulatory and Development Authority (PFRDA) will oversee the investment components of the scheme. Additionally, the Department for Pension and Pensioners’ Welfare and the National Security Depository Ltd (NSDL) are collaborating on designing and validating the operational requirements of the scheme.

In August 2024, the Central government recently announced the introduction of the Unified Provident Scheme (UPS) for central government employees. This scheme is anticipated to benefit approximately 2.3 million employees.

Unlike the current National Pension System (NPS) in which employees must mandateorily contribute, the UPS is optional for central government employees.

Under the NPS, both employees and the government (employer) make contributions, and the fund is then invested in the financial market with a diversified portfolio of equity and debt. The management of these funds is overseen by professional pension fund managers.

UPS: Key features

UPS combines elements of both the Old Pension Scheme (OPS) and the New Pension Scheme (NPS). Similar to NPS, UPS is a contributory scheme requiring employees to contribute 10% of their salary towards the pension during their working years. Additionally, UPS offers the security of a guaranteed pension similar to OPS. Employers are also required to contribute 18.5% towards the scheme.

Upon retirement, employees will receive a guaranteed pension, gratuity, and a lump-sum payment. The pension amount will be 50% of an employee’s average salary over the last 12 months if they have worked for 25 years or more. For those with a service period between 10 to 25 years, the pension amount will be proportionate. However, UPS ensures that every individual receives a minimum pension of Rs 10,000.

The lump-sum amount received will be calculated as 1/10th of the employee’s salary for every six months of service. Additionally, there is a provision for a guaranteed family pension, which amounts to 60% of the employee’s pension while they are still alive.

Top points

Guaranteed Pension: The pension amount will be 50% of the average basic pay received in the last 12 months before retirement, provided the individual has completed a minimum of 25 years of service. For those with a lesser service period, the pension will be proportionate for a minimum of 10 years of service.

Guaranteed Family Pension: The family will receive 60% of the deceased employee’s pension amount before their demise.

Guaranteed Minimum Pension: A minimum pension of Rs 10,000 per month will be provided upon superannuation after a minimum of 10 years of service.

Inflation Adjustment: The assured pension, family pension, and minimum pension will be adjusted for inflation based on the All India Consumer Price Index for Industrial Workers (AICPI-IW).

Dearness Relief: This will be provided to employees based on the AICPI-IW, similar to service employees.

Lump Sum Payment: A lump sum payment, in addition to gratuity, will be provided at superannuation. This payment will be equivalent to 1/10th of the monthly emoluments (pay + DA) as on the date of superannuation for every completed six months of service.