The Union Cabinet has approved the Unified Pension Scheme (UPS), set to be implemented on April 1, 2025. This new scheme guarantees government employees a pension post-retirement, addressing long-standing calls for changes to the National Pension Scheme (NPS). The UPS will offer a guaranteed pension of 50% of the last drawn salary for employees who joined the service after January 1, 2004.

The approval is seen as a strategic move ahead of upcoming Assembly elections in Jammu & Kashmir, Haryana, Maharashtra, and Jharkhand, especially as several states have reverted to the Old Pension Scheme (OPS) amid growing dissatisfaction with the NPS. Under the UPS, the government will increase its contribution to 18.5%, while employees will contribute 10% of their basic pay and DA.

Key Highlights

• Pension Calculation: UPS will base pensions on the average of the last 12 months’ salary, rather than the last drawn salary.
• Employee Contribution: Similar to NPS, employees will contribute 10% of their basic pay and DA, with the government contributing 18.5%.
• Tax Benefits: Details on tax benefits for UPS contributions are yet to be clarified.
• Higher Minimum Pension: UPS guarantees a minimum pension of ₹10,000 per month.
• Lump Sum Payment: Unlike OPS, UPS offers a lump sum payment without reducing the pension amount.

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