What happens if the pensioner dies?

If a pensioner passes away, their family will receive 60% of the pension the employee was receiving.

What about retirees under NPS?

The provisions of UPS will apply to former NPS retirees who have already retired. Any arrears from past periods will be paid with interest at PPF rates.

Can you switch from UPS to NPS later?

No, once you opt for UPS, you cannot switch back to NPS. Existing NPS/VRS employees and future employees will have the option to join UPS, but this choice is irreversible once made.

What will you receive at the time of retirement?

Upon retirement under UPS, you will receive a lump sum payment at superannuation along with gratuity. This payment, calculated as 1/10th of your monthly emoluments (pay + DA) for every six months of completed service, will not reduce the assured pension amount.

Unified Pension Scheme

The Unified Pension Scheme (UPS) is a new pension scheme introduced by the Indian government for its employees. It provides a guaranteed pension of 50% of the average basic pay drawn over the last 12 months for employees with at least 25 years of service. The government contributes 18.5% to the scheme, and employees contribute 10%.

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Disclaimer: ##Rs 60,000 are the monthly pension amounts at the assumed rate of return of 8% p.a. and 4% p.a. for unit linked insurance plans. This is an illustrative example and the returns are not guaranteed & dependent on the policy term and premium term availed along with the other variable factors. The market linked return of 60K per month is for an 18 year old investing 6k per month for 20 years in a whole life policy having policy term 82 years in which Systematic partial withdrawals start at the age of 65 years at 5% rate of withdrawal per year. The investment risk in the policy is borne by the policyholder. All Plans listed here are of insurance companies’ funds. *Tax benefits and savings are subject to changes in tax laws. All Plans listed here are of insurance companies’ funds. Disclaimer: #The investment risk in the portfolio is borne by the policyholder. Life insurance is available in this product. The maturity amount of Rs 1 Cr. is for a 30 year old healthy individual investing Rs 10,000/- per month for 30 years, with assumed rates of returns @ 8% p.a. that is not guaranteed and is not the upper or lower limits as the value of your policy depends on a number of factors including future investment performance. In Unit Linked Insurance Plans, the investment risk in the investment portfolio is borne by the policyholder and the returns are not guaranteed. Maturity Value: ₹1,05,02,174 @ CAGR 8%; ₹50,45,591 @ CAGR 4%. *Tax benefits and savings are subject to changes in tax laws. All plans listed here are of insurance companies’ funds.

What is the Unified Pension Scheme (UPS)?

The Unified Pension Scheme (UPS) is a new pension scheme introduced by the Indian government for its employees, effective from April 2025. This scheme is a significant departure from the existing National Pension Scheme (NPS) and offers a fixed pension amount to employees after a minimum of 25 years of service. UPS ensures retirees receive a guaranteed and predetermined sum regularly after retirement.

What are Pension Plans?

Pension plans in India are investment products designed to provide a regular income after retirement. They offer a secure way to save for your post-retirement life. There are various types of pension plans available, including government-sponsored schemes like the Unified Pension Scheme (UPS), National Pension System (NPS) and private insurance-based plans.

When Will the Unified Pension Scheme (UPS) be Implemented?

The Unified Pension Scheme (UPS) will be implemented from April 1, 2025. This means that all Central government employees who join the service on or after this date will automatically be enrolled in the UPS.

Features of the Unified Pension Scheme (UPS)

Below are the features of the Unified Pension Scheme (UPS):

Fixed Pension: Employees will receive a fixed pension of 50% of their average basic pay drawn over the last 12 months before superannuation, provided they have completed a minimum of 25 years of service.
Pro-rata Pension: For those with less than 25 years of service, the pension will be proportionate to the number of years served, with a minimum of 10 years required for eligibility.
Family Support: In case of the employee's demise, their family members will be entitled to a family pension of 60% of the employee's pension immediately before their death.
Safety Net: Employees who complete a minimum of 10 years of service will be guaranteed a minimum pension of Rs. 10,000 per month upon superannuation.
Purchasing Power Protection: To protect the pension from inflation, the assured pension, assured family pension, and assured minimum pension will be indexed to the All India Consumer Price Index for Industrial Workers (AICPI-IW).
Cost of Living Adjustment: Employees will receive dearness relief based on the AICPI-IW, similar to the benefits provided to other government employees.
Additional Benefit: In addition to gratuity, employees will be eligible for a lump sum payment at superannuation. This payment will be calculated as 1/10th of their monthly emoluments (pay + DA) for every six months of service completed.

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Also Read: Pension Plan in India

Eligibility Criteria for the Unified Pension Scheme (UPS)

New Joiners: Employees who join the Central government service on or after April 1, 2025 will automatically be enrolled in the Unified Pension Scheme (UPS).
Existing Employees: Employees who joined the service before April 1, 2025, can voluntarily opt for the UPS.
Pension Eligibility: To be eligible for a pension, employees must complete a minimum of 10 years of qualifying service.
Assured Minimum Pension: Employees with at least 10 years of qualifying service are guaranteed an assured minimum pension of Rs. 10,000 per month.

How is the Pension Calculated Under the Unified Pension Scheme (UPS)?

The Unified Pension Scheme (UPS) offers a straightforward method for calculating the pension amount.

Pension Calculation Formula:

Base Pension: 50% of the average basic pay drawn in the last 12 months before retirement.
Dearness Allowance (DA): The base pension will be adjusted for inflation through regular updates in the dearness allowance.

You can also use the NPS calculator to help government employees calculate the returns on their investments in the pension scheme.

Is There a Minimum Pension Under the Unified Pension Scheme (UPS)?

The Unified Pension Scheme (UPS) guarantees a minimum pension of Rs. 10,000 per month to employees who complete at least 10 years of qualifying service. This ensures a basic level of financial support for employees with shorter service periods.

Can You Switch from the Unified Pension Scheme (UPS) to the National Pension Scheme (NPS)?

You cannot switch from the Unified Pension Scheme (UPS) to the National Pension Scheme (NPS) once you have chosen the UPS. The government has made it clear that the choice between UPS and NPS is final. While existing NPS/VRS employees and future employees have the option to join UPS, once they make their choice, they cannot change their mind.

How Does the Unified Pension Scheme (UPS) Differ from the National Pension Scheme?

Here's a comparison of the key differences between the two:

Feature	Unified Pension Scheme (UPS)	National Pension Scheme (NPS)
Eligibility	Central government employees who joined service after January 1, 2004	Any Indian citizen between the ages of 18 and 70
Pension Type	Defined benefit scheme (guaranteed pension)	Defined contribution scheme (pension based on contributions and market performance)
Pension Amount	50% of the last drawn basic salary	Depends on the accumulated corpus and chosen annuity plan at retirement
Government Contribution	18.5% of the basic salary	14% of the basic salary (matched with employee's contribution)
Family Pension	60% of the employee's pension	Depends on the accumulated corpus and chosen annuity plan at retirement
Risk	Lower risk due to guaranteed pension	Higher risk due to market-linked returns
Portability	Not applicable (restricted to central government employees)	Portable, allowing account transfer across employers and locations
Tax Benefits	Not yet specified	Tax benefits under Section 80CCD of the Income Tax Act

Conclusion

The Unified Pension Scheme (UPS) offers a significant improvement over previous pension schemes, providing government employees with a guaranteed pension, family pension, and inflation-indexed benefits. While it may involve some trade-offs in terms of potential returns compared to market-linked options, UPS offers a secure and reliable retirement income.

FAQs

What happens if the pensioner dies?

If a pensioner passes away, their family will receive 60% of the pension the employee was receiving.
What about retirees under NPS?

The provisions of UPS will apply to former NPS retirees who have already retired. Any arrears from past periods will be paid with interest at PPF rates.
Can you switch from UPS to NPS later?

No, once you opt for UPS, you cannot switch back to NPS. Existing NPS/VRS employees and future employees will have the option to join UPS, but this choice is irreversible once made.
What will you receive at the time of retirement?

Upon retirement under UPS, you will receive a lump sum payment at superannuation along with gratuity. This payment, calculated as 1/10th of your monthly emoluments (pay + DA) for every six months of completed service, will not reduce the assured pension amount.

†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. The sorting is based on past 10 years’ fund performance (Fund Data Source: Value Research). For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
*All savings are provided by the insurer as per the IRDAI approved insurance plan.
^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.
+Returns Since Inception of LIC Growth Fund
¶Long-term capital gains (LTCG) tax (12.5%) is exempted on annual premiums up to 2.5 lacs.
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^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.