Centre's Unified Pension Scheme to enhance pension benefits; here's all you need to know about UPS
Unified Pension Scheme: The Union Cabinet, led by Prime Minister Narendra Modi, has adopted a significant decision in the form of the Unified Pension Scheme (UPS) for central government employees. This progressive move is expected to dramatically improve pension benefits for 23 lakh central government employees and potentially reach 90 lakh beneficiaries if state governments opt-in.
By creating a solution that guarantees economic soundness while avoiding the problems of earlier schemes, the government has adopted a cautious approach to assuring long-term financial stability for both the state and its citizens.
Let's look at what is UPS, how it differs from existing pension schemes
The UPS (Unified Pension Scheme), approved by the Union Cabinet, offers benefits to pensioners, including inflation-linked dearness relief and a minimum monthly pension of Rs 10,000 for those with at least 10 years of government service.
The announcement received varied reactions from trade unions across the political spectrum. The Bharatiya Mazdoor Sangh (BMS), which is linked with the Rashtriya Swayamsevak Singh (RSS), has applauded the scheme but has asked for additional information on certain aspects of the UPS. However, opposition-affiliated labour unions such as the Hindu Mazdoor Sangh, CITU, and AITUC alleged that the UPS was created to deceive employees.
Most parties, including Congress, have stated that implementing the UPS would be equivalent to reverting to the Old Pension Scheme (OPS), which was originally adopted during the colonial period. The move is also a stunning reversal by the NDA government, given the first NDA government, led by Atal Bihari Vajpayee, scrapped the OPS in order to build the new pension scheme (NPS).
A central government employee will have to contribute 10% to the UPS. This was not the case in the OPS, where the Centre bore the entire amount, but this 10% was imposed under the NPS.
Like OPS, the UPS will include an assured pension amount. In addition, the pension amount will rise in line with the inflation index, as it does under the OPS. The pension amount is not based on market fluctuations as in the case of the NPS.
The government contribution to the NPS was 14%. Under the UPS, it has been raised to 18.5%. So, the government is taking on the additional burden.
The key distinction in the UPS is that it is both a funded and contributory scheme, and it guarantees an assurance on the pension amount.
The initiative will help 23 lakh central government employees. If the states follow as well, a total of 90 lakh employees now enrolled in the NPS can profit. All BJP-led states will shortly implement the UPS.
Employees who have been covered by the NPS since 2004 will be given the option of switching to UPS by April 1, 2025. Arrears will be paid to them as well.
- With inputs from agencies
