Unified Pension Scheme 2025 Notification Issued !- UPS Calculation, Features and Eligibility Explained !

The Ministry of Finance has issued the Unified Pension Scheme 2025 Notification on January 24, 2025. The notification outlines the pension calculation method, highlights the scheme’s key features, and explains the eligibility criteria. This scheme aims to simplify and unify pension benefits across sectors, ensuring financial security for individuals post-retirement.

Unified Pension Scheme 2025

The Unified Pension Scheme (UPS) introduced by the Ministry of Finance, India, effective from April 1, 2025, as an optional scheme under the National Pension System (NPS) for Central Government employees. Here’s a summary:

Unified Pension Scheme 2025 Key Features

Eligibility:

• Employees with at least 10 years of qualifying service are eligible.
• Assured payouts are provided in cases of superannuation, voluntary retirement (after 25 years), or forced retirement under specific rules (e.g., FR 56(j)).
• Employees dismissed, removed, or resigned are not eligible for assured payouts.

Assured Payouts:

• 50% of the last 12 months’ average basic pay for employees with 25+ years of service.
• Proportionate payout for shorter service, with a minimum guaranteed payout of ₹10,000/month.
• Family pensions at 60% of the assured payout will be provided to the spouse after the pensioner’s death.

Contributions:

• Employees contribute 10% of basic pay + DA, matched equally by the government.
• An additional 8.5% contribution is made by the government to a pooled corpus.

Investment:

Employees can choose investment options for their individual corpus, regulated by the Pension Fund Regulatory and Development Authority (PFRDA). A default investment pattern applies if no choice is made.

Transition for Existing Retirees:

Retirees under NPS before April 2025 can opt into the scheme, receiving arrears with interest based on PPF rates.

One-Time Lump Sum:

A lump sum payment of 10% of monthly emoluments (basic pay + DA) for every six months of qualifying service is provided on retirement.

Regulations and Benchmarking:

A benchmark corpus value will be calculated to determine payouts, based on regular contributions and investment returns.

Non-Entitlement:

Employees opting for UPS cannot claim additional financial benefits or policy changes after retirement.

Examples:

Illustrative scenarios in the Annexure provide examples of payouts based on service length, contributions, and corpus value. For instance:

Employees with 25 years of service and ₹45,000 average basic pay can expect assured payouts of ₹22,500/month plus dearness relief.

Unified Pension Scheme 2025 Notification with UPS Calculation, Features and Eligibility

MINISTRY OF FINANCE
(Department of Financial Services)
NOTIFICATION
New Delhi, the 24th January, 2025

F. No. FX-1/3/2024-PR.—In partial modification of the Ministry of Finance (Department of Economic Affairs) Notification No. F. No. 5/7/2003-ECB&PR dated 22nd December, 2003 and Ministry of Finance (Department of Financial Services) Notification No. F. No. 1/3/2016-PR dated 31st January, 2019, the Central Government has decided to introduce Unified Pension Scheme, as an option under the National Pension System for the employees of the Central Government who are covered under the National Pension System.

2. The Unified Pension Scheme shall be applicable to such Central Government employees who are covered under National Pension System and who choose this option under National Pension System. It will have the following features, namely: –

Eligibility under the Scheme

i) Assured Payout shall be available only in the following cases, namely: –

(a) in case of an employee superannuating after qualifying service of ten years, from the date of superannuation;

(b) in case of the Government retiring an employee under the provisions of FR 56 (j) (which is not a penalty under Central Civil Services (Classification, Control and Appeal) Rules, 1965) from the date of such retirement; and

(c) in case of voluntary retirement after a minimum qualifying service period of 25 years, from the date such employee would have superannuated, if the service period had continued to superannuation.

(ii) Assured Payout shall not be available in case of removal or dismissal from service or resignation of the employee. In such cases, the Unified Pension Scheme option shall not apply.

Benefits under the Scheme- Unified Pension Scheme 2025 Notification

(iii) Subject to other conditions stated in this notification, Assured Payout under the scheme shall be as follows, namely: –

(a) the rate of full assured payout will be @50% of twelve monthly average basic pay, immediately prior to superannuation. Full assured payout is payable after a minimum 25 years of qualifying service;

(b) in case of lesser qualifying service period, proportionate payout would be admissible;

(c) a minimum guaranteed payout of Rs. 10,000 per month shall be assured in case superannuation is after ten years or more of qualifying service; and

(d) in cases of voluntary retirement after a minimum 25 years of qualifying service, assured payout will commence from the date on which the employee would have superannuated, if he had continued in service.

(iv) In case of death of the payout holder after superannuation, family payout @60% of the payout admissible to the payout holder, immediately before his demise, will be assured to the legally wedded spouse (spouse legally wedded as on the date of superannuation or on the date of voluntary retirement or retirement under FR 56(j), as may be applicable).

(v) Dearness Relief will be available on the assured payout and family payout, as the case may be. The Dearness Relief will be worked out in the same manner as Dearness Allowance applicable to serving employees. Dearness Relief will be payable only when payout commences.

(vi) A lump sum payment will be allowed on superannuation @10% of monthly emoluments (basic pay + Dearness Allowance) for every completed six months of qualifying service. This lump sum payment will not affect the quantum of assured payout.

(vii) The corpus under the Unified Pension Scheme option will comprise of two funds, namely:-

(a) An individual corpus with employee contribution and matching Central Government contribution; and

(b) A pool corpus with additional Central Government contribution.

(viii) The contribution of employees will be 10% of (basic pay + Dearness Allowance). The matching Central Government contribution will also be 10% of (basic pay + Dearness Allowance). Both will be credited to each employee’s individual corpus.

(ix) Central Government shall provide an additional contribution of an estimated 8.5% of (basic pay + Dearness Allowance) of all employees who have chosen the Unified Pension Scheme option, to the pool corpus on an aggregate basis. The additional contribution is for supporting assured payouts under the Unified Pension Scheme option.

(x) The employee can exercise investment choices for the individual corpus alone. Such investment choices shall be regulated by the Pension Fund Regulatory and Development Authority. A ‘default pattern’ of investment may be defined by Pension Fund Regulatory and Development Authority from time to time. If an employee does not exercise an investment choice on individual corpus, the ‘default pattern’ of investment will apply.

(xi) The investment decisions for the pool corpus built through the additional Central Government contribution will solely rest with Central Government.

(xii) In respect of employees who have retired before the date of operation of Unified Pension Scheme and who opt for the Unified Pension Scheme option, Pension Fund Regulatory and Development Authority will determine the mechanism for making available the top- up amount. Explanation: For the purpose of this notification basic pay includes non-practicing allowance granted to medical officer in lieu of private practice.

3.The existing Central Government Employees under National Pension System, on the effective date of operationalisation of the Unified Pension Scheme option, as well as the future employees of Central Government can choose to either take the Unified Pension Scheme option under the National Pension System or continue with the National Pension System without the Unified Pension Scheme option. In case an employee chooses the Unified Pension Scheme option, all its stipulations and conditions shall be deemed to have been opted for and such option once exercised, shall be final.

4. Once an employee covered under National Pension System, who is in service on the effective date of operationalisation of the Unified Pension Scheme option, exercises the Unified Pension Scheme option, the outstanding National Pension System corpus in the employees Permanent Retirement Account Number shall be transferred to the employee’s individual corpus under the Unified Pension Scheme.

5.For each employee covered under National Pension System who has exercised the Unified Pension Scheme option, a ‘benchmark corpus’ value shall be computed, in such manner as may be determined by the Pension Fund Regulatory and Development Authority, with the following assumptions, namely: –

(i) regular receipt of applicable contributions for both the employees and the employer for each month of qualifying service;

(ii) in case of missing contributions, an appropriate value, to be determined by the Pension Fund Regulatory and Development Authority, shall be assigned; and

(iii) investment of such contributions is made as per the ‘default pattern’ of investment, as defined by the Pension Fund Regulatory and Development Authority.

6.The value or units in the individual corpus with investment choices of the employee shall be informed to such employee on a periodic basis. Alongside, the value or units of the benchmark corpus corresponding to the employee, computed as per para 5 above will also be informed to the employee.

7.At superannuation or retirement, the qualifying service of the employee under the Unified Pension Scheme option, will be determined by the Head of Office, where he is employed.

8.At superannuation or retirement, the employee under Unified Pension Scheme shall authorise transfer of the value or units in the individual corpus to the pool corpus, equivalent to the value or units of the benchmark corpus for authorisation of Assured Payout.

In case the value or units of individual corpus is less than value or units of the benchmark corpus, the employee will have an option to arrange for additional contribution to meet this gap. In case the value or units of individual corpus is more than the value or units of the benchmark corpus, the employee shall authorise transfer of value or units equivalent to the benchmark corpus and the balance amount in the individual corpus will be credited to the employee.

9.In case the values or units transferred by the employee from the individual corpus to the pool corpus, is less than the value or units of the benchmark corpus, payout proportionate to the assured payout shall be authorised.

10.The Unified Pension Scheme, being a ‘fund-based’ pension system, relies on the regular and timely accumulation and investment of applicable contributions (from both the employee and the employer) for Assured Payout to the employees

11.For the sake of clarity, it is made clear that any employee who has exercised the Unified Pension Scheme option under National Pension System under this notification, shall not be entitled for and cannot claim, any other policy concession, policy change, financial benefit, any parity with subsequent retirees etc. later including postretirement.

12.The provisions of Unified Pension Scheme will also be applicable, mutatis mutandis to past retirees of National Pension System, who have superannuated before the date of operationalising of Unified Pension Scheme. Such superannuated employees will be paid arrears for the past period along with interest as per Public Provident Fund rates. The monthly top-up amount for such superannuated employees, to be determined by the Pension Fund Regulatory and Development Authority, will be paid after adjusting the withdrawals made by, and annuities paid to, them.

13.The provisions regarding assured payout under the Unified Pension Scheme option for employees facing disciplinary proceedings at the time of superannuation or where disciplinary proceedings are contemplated post retirement, shall be separately notified.

14. Illustrative examples as to working of payouts of Unified Pension Scheme under different scenarios are given in the Annexure.

15. Pension Fund Regulatory and Development Authority may issue regulations for operationalising Unified Pension Scheme.

The effective date for operationalisation of the Unified Pension Scheme shall be 1st April, 2025.

PANKAJ SHARMA, Jt. Secy

View/Download the Unified Pension Scheme 2025 Notification