Centre announces new pension scheme with assured minimum fund for Central govt employees

Set to take effect from April 1, 2025, the scheme was approved by the Union Cabinet and ensures a pension equal to 50 percent of the average basic pay from the last 12 months for employees who have completed at least 25 years of service.

For those with shorter service periods, the pension will be adjusted accordingly. Prime Minister Narendra Modi, who chaired the Union Cabinet meeting, stated that the UPS would provide dignity and financial security for government employees.

"We are proud of the hard work of all government employees who contribute significantly to national progress. The Unified Pension Scheme ensures dignity and financial security for government employees, aligning with our commitment to their well-being and a secure future," he tweeted.

Railways Minister Ashwini Vaishnaw stated that approximately 23 lakh central government employees who are currently enrolled in the National Pension System (NPS) will benefit from the Unified Pension Scheme (UPS).

"Today, the Union Cabinet has approved UPS for government employees providing an assured pension. 50 per cent assured pension is the first pillar of the scheme and the second pillar will be assured family pension," he said.

"There will be an option for employees to opt between the NPS and UPS," he added.

During a media briefing, Cabinet Secretary-designate T.V. Somanathan announced that the new pension scheme will take effect from April 1, 2025.

"The benefits of the UPS are applicable for those retired and retiring till March 31, 2025, with arrears," he added.

Under the new pension scheme, employees will receive a lump-sum payment at the time of superannuation, in addition to gratuity and a payment equal to one-tenth of their monthly emoluments (pay + DA) for every completed six months of service. This payment will not reduce the amount of the assured pension.

Last year, the finance ministry established a committee led by Finance Secretary T.V. Somanathan to review the pension scheme for government employees and recommend any necessary changes within the National Pension System (NPS) framework.

The Centre had previously stated that it had no immediate plans to reintroduce its employees' Old Pension Scheme (OPS), despite demands and protests from non-BJP-ruled states advocating for its implementation.

Several of these states have decided to return to the DA-linked OPS, while employee organisations in other states have also pushed for the same.

The OPS is a defined benefit scheme that guarantees a pension equal to half the last drawn salary for life, with adjustments based on pay commission recommendations.

In contrast, the NPS is a defined contribution scheme where government employees contribute 10 percent of their basic salary, with the government contributing 14 percent.