The Pension Fund Regulatory and Development Authority (PFRDA) has announced the introduction of the Unified Pension Scheme (UPS), set to take effect on April 1, 2025. This new scheme will provide an alternative for central government employees currently enrolled in the National Pension Scheme (NPS). The UPS aims to streamline pension benefits and enhance financial security for government employees, with specific eligibility criteria and contribution requirements outlined in the recent gazette notification.

Who Can Participate in the UPS?
The UPS is designed for several categories of central government employees. Eligible participants include:

Current central government employees who are active as of April 1, 2025, and are already enrolled in the NPS.
New recruits joining central government services on or after April 1, 2025, who must opt into the UPS within 30 days of their appointment.
Employees who have retired or superannuated before March 31, 2025, and were previously covered under the NPS.
The legally wedded spouse of a subscriber who has passed away before making a decision regarding the UPS.These provisions ensure that both current and future government employees have access to the benefits of the UPS, thereby enhancing their retirement security.
Final Decision Required: No Changes Allowed
Employees in the first and third categories must make their decision regarding UPS enrollment within three months of the scheme’s launch. Once an employee opts for the UPS, the decision is considered “final and irrevocable.” The notification clarifies that those who choose the UPS will not be eligible for any other policy concessions or changes in benefits post-retirement. Subscribers will retain their previous Permanent Retirement Account Number (PRAN), which will now be linked to the UPS, while also having the option to maintain a separate NPS account voluntarily.

Contribution Details for UPS Subscribers
Under the UPS, subscribers are required to contribute 10% of their basic pay, including any applicable allowances. The central government will match this contribution, providing an additional 8.5% of the subscriber’s basic pay and dearness allowance. To qualify for the minimum assured payment of ₹10,000 per month, subscribers must complete at least ten years of qualifying service. The UPS allows subscribers to choose their pension fund and investment options from PFRDA-registered funds, with the flexibility to modify their selections annually.

Rajesh Khandagale, Senior Vice President at Kfin, noted that while the UPS currently applies only to central government employees, state governments will need to decide on its implementation independently. The introduction of private pension fund managers into the investment options is expected to provide employees with greater flexibility and choice.

Understanding the Payout Structure
The UPS operates as a contributory fund, meaning both the subscriber and the government contribute to the pension fund. However, subscribers should be aware that their final payout may be reduced if their individual corpus falls short of the benchmark corpus. In such cases, subscribers can replenish their corpus before retirement to avoid a reduction in their payout. Additionally, subscribers or their spouses can withdraw up to 60% of either their individual or benchmark corpus upon retirement.

The assured payout under the UPS is calculated based on the subscriber’s average basic pay over the last twelve months before retirement. A full assured payout is available after a minimum of 25 years of qualifying service, while a guaranteed minimum payout of ₹10,000 per month is assured for those with ten or more years of service, provided contributions are made regularly and no withdrawals occur.

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