On August 24, 2024, the Cabinet gave the green light to introduce the Unified Pension Scheme (UPS), a reform intended to benefit around 23 lakh government employees.

The new scheme will include a lump-sum payment upon retirement, gratuity, and other benefits.

 Key features of the Unified Pension Scheme include:

Guaranteed Pension: Retiring government employees who have completed at least 25 years of service will receive 50% of their average pay from the last 12 months before retirement.

Guaranteed Family Pension: If the government employee passes away, 60% of the pension will be allotted to the spouse.

Guaranteed Minimum Pension: Upon retirement and completion of 10 years of service, employees will receive a minimum pension of Rs 10,000 per month.

Inflation Adjustment: The scheme incorporates provisions for adjusting pensions, family pensions, and the minimum pension in line with inflation to ensure their value is maintained over time.

Scheme Options: Central government employees will choose between the new Unified Pension Scheme and the existing New Pension Scheme.

Pension Contribution: The employee contribution to the scheme will remain at 10%. However, the central government’s contribution will be reviewed every three years.

Expenditure: The financial implications involve a total expenditure of Rs 800 crore for arrears, with an estimated initial annual cost of Rs 6,250 crore for the scheme.

Implementation: The UPS is scheduled to come into force on April 1, 2025. It will also apply retrospectively to government employees who retired from 2004 onwards.

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