Finance Ministry notifies Integrated Pension Scheme for Government Employees

New Delhi:

The Finance Ministry on Saturday informed the Unified Pension Scheme (UPS), which promises to assure 50 per cent of the average basic salary drawn in the last 12 months before superannuation.

The UPS will be applicable to those central government employees who are covered under the National Pension System and who choose this option under the National Pension System, according to a gazette notification issued by the Finance Ministry.

According to the notification published on Saturday, UPS or assured payment will not be available in case of removal from service or resignation or termination of the employee.

As per the January 24 notification, the rate of full assured payment will be 50 per cent of the 12 monthly average basic salary immediately preceding superannuation for a minimum qualifying service of 25 years against a market return linked payment under the NPS.

The notification will give 23 lakh government employees the option to choose between UPS and NP, which came into effect on January 1, 2004.

In case of less qualifying service period, proportionate payment will be admissible, it said, adding a minimum guaranteed payment of Rs 10,000 per month to ensure that the superannuation has ten years or more qualifying service.

The effective date for operation of the Integrated Pension Scheme will be April 1, 2025.

In cases of voluntary retirement after minimum 25 years of qualifying service, the assured payments will commence from the date on which the employee would have superannuation, if he had continued in service, it said.

“In case of death of the payout holder, after superannuation, family payment at the rate of 60 per cent of the payout to the payout holder, immediately before his demise, will be assured to the legally disinherited spouse (the spouse being legally disinherited) “Will be legally married on the date of superannuation or voluntary retirement under FR 56(J), as may be applicable,” it said.

Dearness Relief will be available on Entered Payout and Family Payout, as the case may be, adding, however, that Dearness Relief will be worked out in the same manner as Dearness Allowance is applicable to serving employees.

Dearness relief based on All India Consumer Price Index for Industrial Workers (AICPI-IW) in case of service employees.

“Existing Central Government employees under the National Pension System (NPS), on the effective date of operation of the UPS option, as well as future Central Government employees can choose to take the Integrated Pension Scheme option under the NP or continue to opt for Integrated Pension. NP without plan option,” it said.

Once an employee covered under NPS, who is in service on the effective date of operation of the UPS option, exercises the UPS option, the outstanding corpus in the Employees Permanent Retirement Account Number will be transferred to the individual corpus of the employee under the Integrated Pension Scheme. Will be transferred to, it said.

On superannuation or retirement, it said, the qualifying service of the employee under the UPS option will be determined by the head of the office where he is employed.

The pension fund regulator and development authority may issue rules for the operation of the integrated pension scheme.

Effective April 1, 2025, UPS will increase the government contribution to 18.5 percent from the current 14 percent.

On August 24, 2024, the Union Cabinet chaired by Prime Minister Narendra Modi approved UPS.

Under the Old Pension Scheme (OPS) effective before January 2004, employees received 50 per cent of their last drawn basic pay as pension.

Unlike the old pension scheme, UPS is contributory in nature, wherein employees will be required to contribute 10 per cent of their basic salary and dearness allowance, while the employer’s (central government) contribution will be 18.5 per cent.

However, the final payment depends on the market returns on the corpus, which was mostly invested in government debt.

Employees were not required to make any contribution under OPS. However, he contributed to the General Provident Fund (GPF). The accumulated amount, along with interest, was paid to the employee at the time of retirement.

Since NPS was less attractive than OPS, many non-BJP ruled states decided to go back to the old pension scheme, which offered DA-linked benefits.

This prompted the Center to set up a committee in April 2023 under former finance secretary and now cabinet secretary-designate TV Somanathan to suggest reforms in the NPS architecture.