The Centre has introduced a new pension initiative, the Unified Pension Scheme (UPS), designed to provide government employees with a guaranteed pension upon retirement. Under this scheme, employees who have completed at least 25 years of service will receive a pension amounting to 50% of their average basic salary drawn during the 12 months preceding their retirement. The scheme, which aims to benefit approximately 2.3 million central government employees, was announced by Information and Broadcasting Minister Ashwini Vaishnaw following Saturdays Cabinet meeting.Resolving the Old Pension Scheme DebateThe introduction of UPS is seen as an effort to address the ongoing debate surrounding the old pension scheme (OPS), which has been revived by several opposition-ruled states arguing that OPS is more favorable to employees. UPS, however, offers similar benefits to OPS but is structured to be fiscally sustainable. Unlike the pay-as-you-go model of OPS, UPS will be fully funded by the budget annually, ensuring it does not become a financial burden on future generations.Wider Adoption and Inflation AdjustmentThe Centre anticipates that if state governments choose to adopt UPS, the number of beneficiaries could rise to 9 million. Starting from April 1, 2025, UPS will offer a minimum pension of ₹10,000 per month, with the amount being adjusted for inflation. Employees currently enrolled in the National Pension System (NPS), which is a defined contribution scheme, will have the option to switch to UPS.Enhanced Contributions and BenefitsIn an effort to ensure the schemes full funding, the government will increase its contribution from 14% to 18.5% of employees salaries, while employees will continue to contribute 10%. UPS also includes provisions for a lump sum payment at the time of superannuation and additional benefits for family members of deceased pensioners.The new scheme is based on recommendations from a committee led by Cabinet Secretary-designate TV Somanathan, which was formed in April 2023 to review the pension structure for government employees.
