Unified Pension Scheme: The central government on August 24 approved the Unified Pension Scheme (UPS) which provides for Assured Pension and Assured Family Pension. As per the govt, about 23 lakh employees of the central government would benefit from the Unified Pension Scheme (UPS).
According to the media reports, central government employees can select between the Unified Pension Scheme (UPS) and the National Pension Scheme (NPS). Additionally, current NPS subscribers of the central government will have the choice to transfer to the UPS.
Unified Pension Scheme (UPS) key features
- Employees will receive 50 per cent of their average basic pay from the 12 months before retirement as their pension.
- If an employee dies before retirement, 60 pe rcent of the pension due will be provided to the spouse.
- For those with a shorter service period, UPS guarantees a minimum pension of Rs 10,000 per month.
- UPS includes inflation indexation, similar to dearness allowance, to adjust assured pension, family pension, and minimum pension according to inflation rates.
- In addition to gratuity, UPS provides a lump sum payment at retirement. For every six months of service, employees receive 1/10th of their monthly salary (pay + DA) as a one-time payment.
New Pension Scheme (NPS) key features
- Under NPS, 10 per cent of the employee’s basic salary plus Dearness Allowance (DA) is deducted for the pension fund.
- NPS is linked to the stock market, which means the returns are subject to market fluctuations and it is not entirely risk-free. It also includes tax provisions.
- To receive a pension upon retirement, 40 per cent of the NPS fund must be invested in annuities.
- NPS does not offer a guaranteed fixed pension amount after retirement; the pension depends on the fund’s performance.
- Unlike OPS, NPS does not provide Dearness Allowance (DA) adjustments after retirement.
UPS VS NPS
On Saturday, the Union Cabinet, led by Prime Minister Modi, approved a new pension scheme called the Unified Pension Scheme (UPS). Under this scheme, 50 per cent of the average basic pay is drawn over the last 12 months prior to superannuation for a minimum qualifying service of 25 years. Additionally, the scheme offers various other benefits, such as assured pension, assured family pension, assured minimum pension, inflation indexation
UPS: 5 important things to know
Assured pension
For a minimum qualifying service of 25 years, 50% of the average basic salary drawn for the past 12 months prior to superannuation. Up to a minimum of ten years of service, this compensation is to be commensurate with shorter service periods.
Assured family pension
60% of pension of the employee immediately before her/his demise.
Assured minimum pension
After at least ten years of service, @10,000 per month in superannuation.
Inflation indexation
On assured pension, on assured family pension and assured minimum pension. Dearness Relief based on All India Consumer Price Index for Industrial Workers (AICPI-IW) as in case of service employees.
Lump sum payment at superannuation in addition to gratuity
1/10th of monthly emoluments (pay + DA) as on the date of superannuation for every completed six months of service. This payment does not diminish the quantum of secured pension.
A one-time payment upon retirement equal to 10% of the salary and dearness allowance (DA) for every six months of service is also included. The minister stated, “Upon 30 years of service, approximately six months’ worth of pay will be disbursed as a lump sum upon retirement,” and clarified that this payment is separate from gratuity.
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