The Unified Pension Scheme (UPS), which would affect 23 lakh central government employees, was authorized by the center on Saturday(August 24, 2024). Its goal is to give government workers stability and financial security after they retire.
The Unified Pension Scheme(UPS), which was approved by the Union Cabinet on Saturday, August 24, 2024, also guarantees officials a family pension equal to 60% of a government worker’s pension in the event of their death, a lump sum superannuation payout in addition to gratuity benefits at the time of retirement, and periodic dearness relief hikes in line with inflation trends. A minimum pension of ₹10,000 per month has also been offered to individuals who finish at least ten years of service with the central government.
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What is Unified Pension Scheme in India
The Unified Pension Scheme (UPS) introduced in India has significantly improved how people save for retirement. It’s similar to combining all of the various pension schemes into a single, sizable pot to simplify and increase security for all employed individuals.
The UPS is a new pension policy for the central government employees that guarantees following features.
Key Features of the UPS
Assured Minimum Pension:
Upon retirement, employees with a minimum of ten years of service are guaranteed a minimum pension of ₹10,000 per month.
Assured Family Pension:
In the tragic event that an employee dies, their spouse will get a family pension equal to 60% of the pension the person was receiving prior to their death.
Assured Pension:
Employees with at least 25 years of service will be guaranteed a pension equal to 50% of their average basic pay for the final year before retirement. With a minimum qualifying service length of 10 years, the pension will be proportional with tenure for those with shorter than 25 years of service.
Inflation Indexation:
The family pension and the guaranteed pension are both indexed for inflation. This modification guarantees that the pensions remain in line with inflation.
Dearness Relief:
Retirees under the UPS would receive Dearness Relief based on the All India Consumer Price Index for Industrial Workers (AICPI-IW), much like serving employees do.
Lump Sum Payment on Superannuation:
At the time of superannuation, employees will also get a lump sum payout in addition to a gratuity. The employee will receive a one-tenth of their monthly emoluments, including pay and Dearness Allowance, for each full six months of service upon retirement. The guaranteed pension amount will not be lowered by this lump sum payout.
UPS Eligibility:
The new pension scheme will go into effect on April 1, 2025. Everyone who is retired or plans to retire with arrears by March 31, 2025, is qualified.
In addition to being available to government employees, Central Autonomous Bodies’ personnel can also participate in the National Pension Scheme. If the corresponding State or UT chooses to do so, it is also accessible to all workers of State Governments and State Autonomous Bodies.
Are private workers qualified for NPS or UPS benefits?
The UPS is now available to government employees who prefer the NPS. If their company has accepted the contribution, private employees can access the previous NPS in the meantime. If not, the NPS is a voluntary option open to all Indian citizens (between the ages of 18 and 70).
Tax Advantage
Under section 80 CCD(1), employees who make contributions to the NPS are eligible for tax deductions of up to 10% of their pay (Basic + DA), with an aggregate cap of Rs. 1.50 lakh under section 80 CCE. In addition, under section 80 CCD(1B), they are eligible for a deduction of up to ₹50,000, which is in addition to the total limit of Rs. 1.50 lakh under section 80 CCE. Tax benefits under the UPS, however, have not yet been announced.
Prime Minister Narendra Modi said in a post on X
We are proud of the hard work of all government employees who contribute significantly to national progress. The Unified Pension Scheme ensures dignity and financial security for government employees, aligning with our commitment to their well-being and a secure future,”
Feature comparison of NPS vs OPS vs UPS
| Features | Unified Pension Scheme | New Pension Scheme | Old Pension Scheme |
|---|---|---|---|
| Pension Amount | 50% of their average basic pay for the final year before retirement | Pension amount is variable, not fixed and dependent on market success. | 50% of latest drawn salary |
| Assured Minimum Pension | Employees with at least ten years of service receive a monthly pension of ₹10,000. | Not Specified | Not Specified |
| Employee Contribution | 10% of base pay and DA will be contributed by employees. | 10% per cent of contribution from the employee’s Basic plus DA | No contribution from the employee |
| Security of Pension amount | Completely guaranteed with inflation adjustments | Connected to the market yet not entirely safe | Pension amount is secure |
| Dearness Allowance | Adjusting the DA equivalent using inflation indexing | DA increases are not covered | DA is given every six months. |
| Taxation | Not announced as of Aug 2024 | Taxes are applicable | Not applicable |
Conclusion
In conclusion, UPS aims to be more accessible and financially sustainable while integrating the best aspects of OPS and NPS to give a steady and secure income post-retirement. This important change improves security for all workers, particularly those in the unorganized sector, and streamlines the pension system.
Frequently Asked Questions
Q: How UPS is different from the old plans?
A: Old Pension Scheme (OPS): Your pension was guaranteed, and all expenses were covered by the government.
National Pension System (NPS): The performance of the investments determined the amount of pension you would receive, with contributions from both the government and you.
The Unified Pension Scheme (UPS) combines the two. In addition to some guaranteed income, your pension has the potential to increase in value over time.
Q: Why is UPS such a great pension scheme?
A: It is For Everyone: This applies to all employees, regardless of size or lack of a formal pension plan.
You can Carry It With You : It’s easy to transfer your pension to a new position or address.
A single system for everyone: The pension will be managed by a single organization, making it uniform for all recipients.
Q: When does the UPS scheme go into action?
A: With effect from April 1st, 2025, UPS will be available to all Central government employees who retire on or before March 31, 2025.
Q: Who is qualified for the United Pension Scheme (UPS)?
A: As of right now, every government worker who joined after April 1, 2004, is covered by the NPS. NPS users will now have the option to select between NPS and UPS.
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