New Delhi: The Unified Pension Scheme announced by the Centre is expected to sweeten the incentive for joining the All India Services by offering up to 50 per cent assured pension to those who joined the service after January 1, 2024. The move is expected to put to rest the Opposition clamour for revising the pension incentives.
What is UPS
Under UPS, those who joined the government service after January 1, 2024, will be eligible to receive an assured pension of 50 per cent of average basic pay. This will apply to the pay received over the past 12 months before retirement following a minimum of 25 years of service. Government staffers will have to opt for this scheme in order to be able to avail its benefits. Currently, all AIS staffers are covered by NPS by default. If a staffer serves for 10 years, the benefits under UPS will be proportionately meted out to them, said Information and Broadcasting Minister Ashiwni Vaishnaw. Nearly 23 lakh government staffers are expected to benefit from UPS, he added.
Key features of UPS
The key features of the Unified Pension Scheme are as follows:
The deceased staffer’s spouses will receive an assured family pension
Inflation indexation benefits on assured pension
The beneficiaries are also entitled to an assured family pension and an assured minimum pension
Dearness relief is to be calculated based on the All India Consumer Price Index for Industrial Workers.
On retirement, staffers will receive a lump sum amount equalling 1/10th of the total pay including dearness allowance on the date of superannuation. This will be equal to being awarded for every 6 months of service completed by the government employee.
#Cabinet approves Unified Pension Scheme (UPS) for government employees
➡️The salient features of the UPS are:
🔹 Assured pension: 50% of the average basic pay drawn over the last 12 months prior to superannuation for a minimum qualifying service of 25 years. This pay is to be… pic.twitter.com/4L3v3Ohsz8
— Ministry of Information and Broadcasting (@MIB_India) August 24, 2024
What was the controversy around OPS?
The old pension scheme allowed retired government staffers to receive a 50 per cent pension on their last drawn pay This was disbursed in the form of a monthly pension. Under OPS, the monthly pension was revised with a hike in dearness allowance for government staffers. NPS was introduced in 2004 to reduce the burden of pensions on the national exchequer.
When will UPS come into effect?
UPS will turn effective from April 1, 2025, said cabinet secretary designate T V Somnathan. All those who have retired or are set to retire by March 31, 2025, will be covered by UPS. These retirees will receive their updated pension under UPS in the form of arrears.
The Centre will increase its NPS contribution to 18.5 per cent from 14 per cent going forward. However, employee contribution will remain unchanged at 10 per cent. UPS will cost an additional Rs 6,250 crore to the exchequer. The scheme is also open for states to join.
NPS, UPS and OPS compared
Unlike UPS, it was mandatory for officials to invest 40 per cent of their retirement corpus in annuities under NPS. Only 60 per cent of the retirement corpus withdrawn by the pensioner was tax-free under NPS. Unlike the old pension scheme, UPS lays down a minimum term of service of 25 years for staffers to become eligible for an assured pension. Unlike UPS, OPS offered 50 per cent of the entire last drawn salary as assured pay in a tax-free manner. However, under UPS 50 per cent assured pension will only be applicable on basic pay of the last 12 months’ salary drawn. Further, clarity is awaited on the tax exemption on pensions received under UPS.
The Unified Pension Scheme announced by the Centre on Saturday, August 24, 2024, aims to offer some benefits of OPS to government staffers without significantly increasing the burden of on the exchequer. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
