The Modi government has notified the Unified Pension Scheme (UPS), set to roll out on April 1, 2025, guaranteeing central government employees an assured pension of 50 per cent of their average basic pay from the 12 months preceding retirement, provided they complete 25 years of service.

The scheme, aimed at providing greater financial security to the 23 lakh central government employees currently enrolled in the National Pension System (NPS), combines features of the Old Pension Scheme (OPS) and NPS to ensure guaranteed pensions.

This initiative seeks to enhance retirees’ financial stability, addressing demands for a more predictable post-retirement income.

Employees with at least 10 years of service who retire on superannuation will qualify for assured payouts from their retirement date. Similarly, those retired under Fundamental Rule 56(j) — a provision allowing the government to retire employees in the public interest — will also be eligible unless their retirement results from a penalty.

Employees opting for voluntary retirement after 25 years of service will receive payouts beginning on the date they would have superannuated had they continued working. However, individuals dismissed, removed, or resigning from service are excluded from the scheme.

For shorter service durations, payouts will be proportional. Employees with at least 10 years of qualifying service are assured a minimum monthly pension of ₹10,000.

In cases where a retiree dies post-superannuation, the scheme provides for a family pension equivalent to 60 per cent of the last admissible payout, offered to the spouse.

Dearness relief, calculated similarly to the Dearness Allowance (DA) for serving employees, will be applied to both individual and family pensions once disbursement begins.

Retirees will also receive a lump sum amount equivalent to 10 per cent of their monthly emoluments — basic pay and DA — for every six months of completed service. This payment will not affect the assured pension amount.

The UPS will operate through a dual-fund model. An individual corpus will be funded by employee contributions of 10 per cent of basic pay and DA, matched equally by the government. Additionally, a pool corpus will be supplemented by an 8.5 per cent government contribution, ensuring sufficient resources to support guaranteed payouts.

This scheme is being introduced as an alternative within the NPS framework, reflecting the government’s intent to enhance retirement security while balancing fiscal responsibilities. Employees will be given a one-time choice to opt for either UPS or NPS, with the decision being final.