Unified Pension Scheme (UPS) FAQs
Here are the answers to all your questions:
What is the Unified Pension Scheme?
The Modi government approved a new pension scheme on Saturday called the Unified Pension Scheme (UPS). The UPS includes provisions for a fixed pension amount, ensuring retirees receive a guaranteed and predetermined sum regularly after retirement.When will it be implemented?
The UPS is set to be implemented from April 1, 2025.
How is the pension calculated under UPS?
Under UPS, if you work for 25 years or more, you will receive 50% of your average pay for the preceding 12 months as a pension, adjusted for inflation through dearness allowance.
Do you have to contribute more under UPS?
Employee contributions will remain the same under the UPS. However, the government will increase its contribution from 14% to 18.5%.
What will you get at the time of retirement?
At retirement under UPS, you will receive a lump sum payment at superannuation along with gratuity. This will be 1/10th of your monthly emoluments (pay + DA) on the date of superannuation for every six months of completed service. This payment will not reduce the assured pension amount.
Is there a minimum pension under UPS?
Yes. Retirees under UPS will receive 50% of their average basic pay over the last 12 months before retirement for a minimum of 25 years of qualifying service. For shorter service periods, pensions will be proportionate, with a minimum of 10 years of service. A pension of ?10,000 per month will be given after a minimum of 10 years of service.
Is pension under UPS linked to inflation?
Yes, pensions under UPS will be indexed to inflation. Dearness Relief will be based on the All India Consumer Price Index for Industrial Workers (AICPI-IW), as with serving employees.
What happens if the pensioner dies?
In the unfortunate event of a pensioner’s death, their family will receive 60% of the pension the employee was receiving.
Who is funding UPS?
Unlike OPS, where budget makers do not set aside funds like a company builds a pension reserve, UPS is based on actuarial calculations to assess the liabilities that will arise. An actuarial assessment will be conducted every three years.
What about retirees under NPS?
Provisions of the UPS will apply to past NPS retirees who have already superannuated. Arrears for past periods will be paid with interest at PPF rates.
Can you switch from UPS to NPS later?
No, once you choose UPS, you cannot switch back to NPS. According to the government, existing NPS/VRS employees and future employees will have the option of joining UPS. However, once exercised, the choice will be final.
So, should you opt for UPS?
According to the government, more than 99% of employees will be better off switching to the new scheme. Under NPS, a portion of the fund must be invested in an annuity after retirement. However, since annuity rates in India are low, achieving a 50% return on your investment requires a substantial corpus. The guaranteed 50% pension under UPS is a safer alternative.