Union Cabinet Approves Unified Pension Scheme with 50% Assured Pension for Central Government Employees

In a major decision that will impact 23 lakh central government employees, the Union Cabinet, led by Prime Minister Narendra Modi, has approved the Unified Pension Scheme (UPS). The new pension scheme, which will be effective from April 1, 2025, promises a 50% assured pension for employees, along with several other benefits.

Key Features of the Unified Pension Scheme

1. Assured Pension: Under the UPS, employees will receive 50% of their average basic pay from the last 12 months before retirement as their pension. This is based on a minimum of 25 years of qualifying service. For those with less than 25 years but more than 10 years of service, the pension will be provided on a pro-rata basis.
2. Family Pension: In the event of an employee’s death, the family will receive 60% of the employee’s last drawn pension.
3. Minimum Pension: A minimum pension of Rs 10,000 per month is guaranteed for those who have served at least 10 years.
4. Inflation Indexation: The pension, family pension, and minimum pension will be adjusted for inflation, linked to the All India Consumer Price Index for Industrial Workers (AICPI-IW), similar to how Dearness Relief is calculated for serving employees.
5. Lump-Sum Payment: Upon retirement, employees will receive a lump-sum payment in addition to their gratuity. This payment will be 1/10th of their monthly salary (including DA) for every six months of service completed. Importantly, this lump-sum payment will not reduce the amount of the assured pension.

The UPS will also be optional for existing central government employees who are currently enrolled under the National Pension System (NPS). Additionally, states have the option to adopt this scheme, potentially benefiting 90 lakh employees across the country.

To further enhance the scheme, the government’s contribution to the pension will be increased from 14% to 18.5%, while the employee’s contribution remains at 10%.

Information and Broadcasting Minister Ashwini Vaishnaw announced the details of the UPS, emphasizing that the scheme has been carefully designed using actuarial science to ensure sustainability and fairness. He noted that this scheme could be a game-changer for central and state government employees, providing them with financial security in their retirement years.

This decision follows over a year of deliberation by a four-member committee, formed in April 2023, under the then Finance Secretary T.V. Somanathan, to review the pension system for government employees.

With the approval of the UPS, central government employees can look forward to a more secure and predictable retirement, thanks to this landmark decision by the Union Cabinet.

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