Unified Pension Scheme (UPS), Gazette Notification January-2025

The Unified Pension Scheme (UPS)

The Unified Pension Scheme (UPS), initially announced by the Central Government on August 24, 2024, has now been officially notified through a gazette notification on January 24, 2025. The Government of India has introduced the scheme as an option under the National Pension System (NPS) for Central Government employees, the scheme will come into effect on April 1, 2025.

Unified Pension Scheme Details and Features

• Unified Pension Scheme Notification
• Date of Notification: January 24, 2025
• Issued by: Ministry of Finance, Government of India
• The Unified Pension Scheme shall be applicable to such Central Government employees who are covered under National Pension System and who choose this option under National Pension System.

Eligibility under the Unified Pension Scheme (UPS)

1. Cases Eligible for Assured Payout:
   • Superannuation: Employees who complete a qualifying service of at least 10 years and superannuate are eligible for the assured payout, starting from the date of superannuation.
   • Retirement Under FR 56(j): Employees retired by the Government under Fundamental Rule 56(j) (not as a penalty under the Central Civil Services (Classification, Control, and Appeal) Rules, 1965) are eligible from the date of such retirement.
   • Voluntary Retirement: Employees opting for voluntary retirement after completing 25 years of service are eligible for the assured payout starting from the date they would have superannuated had they continued in service.
2. Ineligibility for Assured Payout:
   • The assured payout is not applicable in cases of:
     • Removal or Dismissal: If an employee is removed or dismissed from service.
     • Resignation: Employees who resign from service.
       In such scenarios, the Unified Pension Scheme option cannot be applied.

Benefits Under the Unified Pension Scheme

• Assured Payout Amount:
  • Full Assured Payout: Employees with 25 years or more of qualifying service are entitled to 50% of the 12-month average basic pay before superannuation.
  • Proportionate Payout: For employees with less than 25 years of service, a proportionate payout will be provided.
  • Minimum Guaranteed Payout: Employees superannuating after 10 years or more of service are assured a minimum payout of ₹10,000/month.
  • Voluntary Retirement: For employees retiring voluntarily after 25 years of service, the assured payout begins from the date they would have superannuated if they had continued in service.
• Family Payout:
  • In case of the payout holder’s death after superannuation, the legally wedded spouse will receive a family payout of 60% of the last payout.
• Dearness Relief (DR):
  • Dearness Relief (DR) will be applicable to both assured and family payouts and calculated similar to Dearness Allowance (DA) for serving employees. DR is only payable when the payout begins.
• Lump-Sum Payment:
  • On superannuation, a lump sum payment of 10% of monthly emoluments (Basic Pay + DA) for every completed six months of qualifying service will be granted. This does not affect the assured payout amount.

Corpus Structure:

• Individual Corpus: Comprises contributions by the employee and an equal 10% Central Government contribution.
• Pool Corpus: Includes an additional 8.5% Central Government contribution (of Basic Pay + DA) for all UPS option holders to support assured payouts.
  • Employees can manage the individual corpus via Pension Fund Regulatory and Development Authority (PFRDA) investment options.
  • The pool corpus investment will be managed by the government.

Contribution Details:

• Employees will contribute 10% of Basic Pay + DA, matched by a 10% Central Government contribution, credited to the individual corpus.
• An additional 8.5% contribution by the Central Government will go to the pool corpus.

Investment Choices:

• Employees may choose investments for the individual corpus, regulated by the Pension Fund Regulatory and Development Authority (PFRDA).
• If no choice is made, a default investment pattern defined by the PFRDA will apply.
• Investment decisions for the pool corpus are solely managed by the Central Government.

Provisions and Operational Framework of the Unified Pension Scheme (UPS)

Choice Between UPS and NPS:

• Existing Central Government employees under the National Pension System (NPS) as of the effective operational date of the UPS, as well as future Central Government employees, have the option to:
  • Opt for the Unified Pension Scheme (UPS) under NPS.
  • Continue with the existing NPS without the UPS option.
• Once the UPS option is exercised, all its conditions become binding, and the decision is final.

Transfer of Corpus:

• Upon opting for UPS, the employee’s outstanding NPS corpus in their Permanent Retirement Account Number (PRAN) will be transferred to the individual corpus under the UPS.

Benchmark Corpus:

• For employees opting for UPS, a benchmark corpus value will be calculated by the Pension Fund Regulatory and Development Authority (PFRDA) based on:
  • Regular contributions by both employee and employer for each month of qualifying service.
  • Assignment of appropriate values for missing contributions as determined by PFRDA.
  • Investment of contributions following the default investment pattern defined by PFRDA.

Periodic Updates to Employees:

• Employees will be periodically informed of the value or units in their individual corpus as per their chosen investment options.
• Alongside, the benchmark corpus value corresponding to the employee will also be shared.

Determination of Qualifying Service:

• At superannuation or retirement, the employee’s qualifying service under the UPS will be verified by the Head of Office.

Transfer of Corpus at Superannuation/Retirement:

• At retirement, the employee will authorize the transfer of the individual corpus value to the pool corpus, equivalent to the benchmark corpus value for assured payout authorization.
• If the individual corpus value is less than the benchmark corpus, the employee may contribute additional funds to cover the gap.
• Any surplus in the individual corpus beyond the benchmark value will be credited to the employee.

Proportionate Payouts:

• If the value transferred to the pool corpus is less than the benchmark corpus, the employee will receive a proportionate assured payout.

Fund-Based System:

• The UPS operates as a fund-based pension system, requiring regular and timely contributions from both the employee and employer for assured payouts.

No Additional Benefits Post-Retirement:

• Employees opting for UPS are not entitled to claim any additional financial benefits, policy changes, or concessions post-retirement, even in case of policy amendments or changes for subsequent retirees.

Application to Past Retirees:

• The provisions of UPS apply mutatis mutandis to employees who retired under NPS before the operational date of UPS.
• These retirees will receive arrears with interest at Public Provident Fund rates, and monthly top-ups will be adjusted against previous withdrawals and annuities.

Employees with Disciplinary Proceedings:

• Separate provisions for assured payouts will be notified for employees under disciplinary proceedings at the time of superannuation or when proceedings are contemplated post-retirement.

Illustrative Examples:

For an employee with a 12-month average basic pay of ₹45,000 and 25 years of service:

• Assured monthly payout: 50% of ₹45,000 = ₹22,500.
• Family payout (on demise): 60% of ₹22,500 = ₹13,500.

• Detailed examples of payout calculations under various scenarios are included in the Annexure.

Regulations by PFRDA:

The PFRDA will issue regulations to facilitate the operationalization of the UPS.

Dates and Implementation

• Employees in service on or after April 1, 2025, may choose between continuing under NPS or opting for the Unified Pension Scheme.
• Once chosen, the option is final and cannot be revoked.

This notification provides a detailed structure of the Unified Pension Scheme (UPS), including illustrative scenarios for calculating assured payouts, lump-sum payments, and other provisions. Here’s a summary of the key elements and computations based on the examples provided:

Key Parameters:

• Basic Pay (P): ₹45,000 (12-month average before superannuation).
• Qualifying Service (Q): Based on the number of monthly contributions. Maximum = 300 months (25 years).
• Individual Corpus (IC): Employee’s retirement corpus based on contributions and investment returns.
• Benchmark Corpus (BC): The expected corpus based on standard contributions and default investment patterns.

Formula for Assured Payout:

Illustrative Scenarios:

Lump Sum Payments (Qualifying Service ≥ 10 Years):

Conclusion:
The UPS provides flexibility for employees to maximize benefits while ensuring an assured payout. The payout depends on service length, corpus value, and adherence to contributions. Proper management of contributions and investments is crucial for maximizing benefits under this scheme.

For further details, refer to the official gazette notification issued by the Ministry of Finance, Government of India, CG-DL-E-25012025-260482 (F. No. FX-1/3/2024-PR).
PANKAJ SHARMA
Joint Secretary

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