Understanding the Unified Pension Scheme for Central Government Employees

Introduction to the Unified Pension Scheme (UPS)

The Pension Fund Regulatory and Development Authority (PFRDA) introduced the Unified Pension Scheme (UPS) as an alternative to the National Pension Scheme (NPS) for central government employees starting April 1, 2025. This scheme is a contributory fund with contributions from both the subscriber and the government.

Eligibility Criteria for UPS

• Central government employees already covered under NPS as of April 1, 2025
• New recruits in central government services on or after April 1, 2025
• Central Government employees who were covered under NPS and have superannuated or voluntarily retired on or before March 31, 2025
• The legally wedded spouse of a subscriber who has superannuated or retired and has died before opting for UPS

Final and Irrevocable Decision

Employees in categories 1 and 3 must decide about UPS enrolment within three months from April 1, 2025. Once confirmed, the selection of UPS becomes “final and irrevocable.”

UPS Contribution Requirements

The monthly contribution of the UPS subscriber is 10% of the basic pay (including non-practising allowance, where applicable) and dearness allowance. The central government will provide matching contributions to each subscriber’s PRAN. Additionally, the Central Government will contribute approximately 8.5% of (basic pay + Dearness Allowance) for employees selecting UPS.

Minimum Assured Payment

UPS subscribers must complete ten years of qualifying service to receive the minimum assured payment of Rs 10,000/month.

Investment Options for UPS Subscribers

UPS subscribers can choose from PFRDA-registered pension funds. Without an active selection, the default pattern applies automatically. Participants have the flexibility to modify their pension fund selection once per financial year and investment preferences twice annually.

Available Investment Alternatives

• Full investment allocation in Government securities (Scheme G)
• Selection from these life cycle-based schemes:
• Conservative Life Cycle Fund limiting equity exposure to twenty-five percent
• Moderate Life Cycle Fund limiting equity exposure to fifty percent

Possibility of Reduced Payout

If there is a deficit in your individual corpus compared to the benchmark corpus, it may result in a proportional reduction of your retirement payout.

Assured Payout Calculation under UPS

“the rate of full assured payout will be at the rate of 50% of 12 monthly average basic pay, immediately before superannuation. A full assured payout is payable after a minimum of 25 years of qualifying service. In case of a lesser qualifying service period, a proportionate payout would be admissible.”