Key features of Unified Pension Scheme & Comparison with NPS

The Unified Pension Scheme (UPS) is a new pension plan introduced by the Government of India in August 2024, aiming to provide central government employees with a more secure retirement. The scheme is set to be fully implemented by April 2025 and offers an assured pension, making it a attractive alternative to the National Pension Scheme (NPS).

Here are the key features of the UPS:

• Assured Pension: 50% of the average basic pay over the last 12 months before retirement, applicable for employees with at least 25 years of service.
• Assured Minimum Pension: ₹10,000 per month for those retiring after 10 years of service.
• Assured Family Pension: 60% of the retiree's pension for the surviving spouse or eligible dependents.
• Lump-Sum Payment: Equivalent to one-tenth of the monthly emoluments for every six months of service.
• Inflation Indexation: Pension amounts adjusted based on the All India Consumer Price Index for Industrial Workers (AICPI-IW).

The UPS is contributory, with employees contributing 10% of their basic salary plus dearness allowance (DA), and the government contributing 18.5% + DA ¹. This is a significant increase from the 14% government contribution under the NPS.

To be eligible for the UPS, employees must have completed at least 10 years of government service. Government employees who joined the public sector after 2004 and are covered under the NPS can opt for the UPS.

Scheme Factor	Unified Pension Scheme	New Pension Scheme
Government Contribution	18.5% of the employee’s basic salary and DA.	14% of the employee’s basic salary and DA.
Assured Pension	Provides a guaranteed pension equal to 50% of the average basic salary for the last 12 months before retirement for those with 25 years of service.	The pension is not guaranteed and depends on market returns. The value fluctuates based on the investments and the accumulated corpus.
Family Pension	Guarantees 60% of the pension to the family in the event of the pensioner’s death.	The family pension depends on the accumulated corpus and the annuity plan chosen.
Risk factor and Return	Offers no market risk and guaranteed fixed returns; suitable for risk-averse employees	Since it is a market-linked pension scheme, the returns vary based on the performance of the chosen investments. This means potentially higher returns but with greater risk.
LumpSum Payment	Provides a lump sum without affecting the pension amount.	Allows up to 60% of the total accumulated corpus to be withdrawn.