A SUITABLE ALTERNATIVE? UPS GIVES CENTRAL GOVERNMENT EMPLOYEES THE OPTION OF GUARANTEED PENSION RETURNS.WILL IT IMPACT THE POPULARITY OF NPS

The Unified Pension Scheme (UPS), launched on April 1, 2025, introduces significant changes to India's pension framework, particularly impacting the National Pension System (NPS).

- NAVNEET DUBEY

Analysts and experts are actively evaluating how this new scheme will reshape the retirement planning landscape for government employees.

“UPS is being introduced as an alternative to NPS for central government employees, offering a guaranteed 50% pension of the last drawn basic salary and ongoing inflation indexation through dearness relief,” says Sriram Iyer, CEO of HDFC Pension, adding that he anticipates that most employees will choose this option. This extension is set to benefit approximately 2.7 million government employees.

Decoding UPS

Let's take a closer look at UPS. The scheme guarantees a pension amount equivalent to 50% of an employee's average basic salary over the last 12 months prior to retirement. Eligibility requires a minimum of 25 years of service, with proportional benefits for those serving between 10 years and 25 years. In the event of a pensioner's demise, the scheme provides a family pension amounting to 60% of the original pension. Additionally, it ensures a minimum pension of ₹10,000 per month for retirees with at least 10 years of service. Pension amounts are adjusted for inflation through dearness relief, and retirees receive a lump-sum payment upon retirement, calculated as one-tenth of monthly emoluments for every completed six months of service.