Unified Pension Scheme Approved: Benefits for 23 Lakh Central Employees
Central Government Introduces Unified Pension Scheme (UPS) to Replace NPS
The Central Government has announced the introduction of the Unified Pension Scheme (UPS) as a replacement for the New Pension Scheme (NPS) for central government employees. On Saturday, August 24, Union Minister Ashwini Vaishnaw shared this development, stating that the Cabinet had approved the scheme. The UPS is set to be implemented from April 1, 2025.
The new UPS will benefit 23 lakh central government employees, offering them the choice between the UPS and NPS. If state governments decide to adopt this scheme, it could potentially benefit up to 90 lakh employees across the country.
How Does UPS Differ from the New Pension Scheme?
According to Union Minister Vaishnaw, the UPS will alleviate the financial burden on employees. Under the current NPS, employees contribute 10% of their basic salary, with the government adding 14%. However, under the UPS, the government will contribute 18.5% of the employee’s basic salary, removing the need for employee contributions.
TV Somnath also mentioned that employees who retired under the NPS from 2004 until March 2025 will benefit from the UPS. Adjustments will be made to any funds they have already withdrawn or received, ensuring they receive the full benefits of the new scheme.
The government’s increased contribution from 14% to 18.5% will result in an additional expenditure of ₹6250 crore in the first year alone, with costs expected to rise annually.
Prime Minister’s Meeting with Central Employee Leaders
Prime Minister Narendra Modi held a meeting with leaders of central employees at his residence. The Ministry of Personnel issued a notice on August 21 in relation to this meeting, which took place ahead of upcoming state assembly elections in Jammu & Kashmir and Haryana.
This meeting marked the first in a decade where the Prime Minister met with members of the National Council of Central Employees, also known as the Joint Consultative Machinery (JCM). The discussions likely covered topics such as the Old Pension Scheme (OPS), the New Pension Scheme (NPS), and the 8th Pay Commission.
Finance Minister Nirmala Sitharaman had previously mentioned the need for NPS reforms during her budget presentation. Additionally, Minister of State for Finance, Pankaj Chaudhary, stated in response to a parliamentary question that the government has no plans to reinstate the OPS.
AIDEF Boycotts Prime Minister’s Meeting
The All India Defence Employees Federation (AIDEF), the largest union of central employees after the Railways, has decided to boycott the meeting with Prime Minister Narendra Modi. AIDEF General Secretary C. Srikumar stated that the organization would not participate in the meeting with the Prime Minister.
The reason for the boycott is that the meeting will focus on reforms to the New Pension Scheme (NPS) rather than the reinstatement of the Old Pension Scheme (OPS). AIDEF has made it clear that their members demand the return of OPS. It’s worth noting that AIDEF also boycotted a meeting with the Finance Ministry on July 15.
Indefinite Strike Planned from May 1
Employee unions had written to Prime Minister Modi on February 29, 2024, demanding the closure of the NPS and the implementation of a guaranteed Old Pension Scheme. They warned that if their demands were not met, they would go on an indefinite strike starting May 1, 2024. However, after the government assured discussions, the strike was postponed.
Somnathan Committee Formed to Reform NPS
In March 2024, the government established a committee under the chairmanship of then Finance Secretary T. V. Somnathan (recently appointed as Cabinet Secretary) to review and propose reforms for the NPS. The committee studied pension schemes from around the world, including reforms made by the Andhra Pradesh government.
The findings suggested that the government could guarantee a pension of 40-45% of the last drawn salary. Recently, reports indicated that the government might guarantee a pension of 50% of the last salary for central employees.
In simple terms, if an employee’s last salary before retirement is ₹50,000, the government plans to provide a pension of ₹25,000 per month.
State Governments May Adopt UPS, Benefitting Nearly 90 Lakh Pensioners
State governments will have the option to adopt the Unified Pension Scheme (UPS). If they choose to do so, the total number of pension beneficiaries could reach nearly 90 lakh. According to the government, there will be an initial cost of ₹800 crore for arrears. Additionally, the annual expenditure in the first year is expected to increase by approximately ₹6,250 crore.
