New Delhi: The Union Finance Ministry has notified the operationalization of the Unified Pension Scheme (UPS) as an option under the National Pension System (NPS) for central government employees from April 1, 2025, which will provide them with retirement benefits. Guarantee will be ensured.

It will come into effect on April 1, 2025. (Representative photo)
It will come into effect on April 1, 2025. (Representative photo)

“The Unified Pension Scheme will be applicable to such Central Government employees who are covered under the National Pension System and who opt for this option under the National Pension System,” the ministry’s January 24 notification said.

It states that the Pension Fund Regulatory and Development Authority (PFRDA) can issue rules for the functioning of UPS. “The effective date for operation of the Unified Pension Scheme will be April 1, 2025,” it added.

On August 24, 2024, the Union Cabinet chaired by Prime Minister Narendra Modi approved a new pension policy for around 2.3 million central government employees, unveiling a framework in which a monthly payment of Rs. % of base pay was guaranteed, which accepted federal staff unions that guaranteed retirement. Benefits

The government had set up a panel in April 2023 headed by cabinet secretary-designate TV Somnath, then finance secretary, to rework the existing pension system, known as the New Pension Scheme or NPS. is Following widespread grievances over the move, which also became a political controversy, some opposition-ruled states switched to the previously privileged Old Pension Scheme (OPS).

The new system, the Unified Pension Scheme or UPS, will offer 50% of the average basic pay drawn by a federal employee 12 months before retirement provided he completes 25 years of service. UPS will come into effect on April 1, 2025.

This fulfills an important demand for a joint consultative machinery, a platform that provides a mechanism for federal staff to resolve any dispute with the central government. Under UPS, if an employee has less than 25 years of service but more than 10 years, he will get pension on pro rata basis.

UPS will also provide family or survivor pension benefits, set at 60 percent of a deceased employee’s last drawn salary. Employees retiring with at least 10 years of service will be assured .10,000 as monthly pension.

UPS will be indexed to the Consumer Price Index for Industrial Workers (CPI-IW), a gauge of price growth compiled by the Labor Bureau. The CPII-IW will be used to calculate dearness relief, which is paid to pensioners to account for inflation.

All employees retiring since 2004 will be eligible to elect UPS, while continuing with NPs will remain an option. According to an official, employees who joined the service before April 2004 will continue under the OPS which offers a fixed pension, which is 50% of their last drawn pay after retirement.

HT had reported on October 18, 2023 that the Pension Committee had decided to recommend a system in which an assured monthly payment was made but OPS was denied.

NPS is a market-linked, fully funded system and was implemented as a major financial reform in 2004, as the previous OPS was a runaway strained arrangement as it was demonetised. . Funds under NP are invested in equity, returns from which determine the amount of eligible pension. In other words, pension under NPS depends on market returns.

A fully funded pension scheme is one that has annual budget allocations and is able to meet current and future financial obligations based on the return of funds on investments and mandatory contributions.

Union Finance Minister Nirmala Sitharaman while presenting the Union Budget on July 23 said: “The NPS Review Committee has made considerable progress in its work. I am happy that the National Council of Joint Consultative Machinery for Central Government Employees A constructive approach has been taken by the staff to develop a solution that addresses the issues while maintaining financial security for the general public.



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