What is the Unified Pension Scheme? Things to know

Read all about the Unified Pension Scheme and how it benefits the applicants. Also, know how it differs from the National Pension Scheme

By Forbes India

Published: May 16, 2025 04:11:21 PM IST

Planning for life after retirement has always been a concern for most people, especially for government employees in India. Over the years, the government introduced several pension schemes in India - some employees were included under the Old Pension Scheme (OPS), others under the National Pension System (NPS). Apart from these, the Union Cabinet approved the Unified Pension Scheme (UPS) in August 2024, effective from April 1, 2025. This scheme was planned for Central Government employees to bring better structure and transparency to the system.

In this article, we’ll discuss everything about the Unified Pension Scheme, what changes it brings, its benefits, and how it differs from the National Pension Scheme in India.

Firstly, what exactly is the Unified Pension Scheme?

The Unified Pension Scheme, or UPS, is a newly announced plan by the Central Government aimed at providing greater security for government employees after their retirement. It is an alternative to the existing National Pension System, which has been mandatory for government recruits since 2004. With UPS, eligible central government employees now have the option to either continue with NPS or shift to this new scheme (without reversal).

This pension scheme in India is currently applicable to employees of the central and state governments. Maharashtra has already taken the lead, announcing the rollout of UPS for its staff in August 2024. If more states follow the path, UPS could eventually cover over 90 lakh people.

Who is eligible for the UPS?

The eligibility depends on employment status, service history, and retirement conditions:

Central and State Government employees covered under NPS and still in service as of 1st April 2025.
Recruits joining the government service on or after 1st April 2025.
Government employees under NPS who have opted for voluntary retirement, or retired under Fundamental Rule 56(j) on or before 31st March 2025.
The legally wedded spouse of a deceased NPS-covered employee who passed away before opting for UPS.

Also note that employees who are dismissed from their service, superannuate, or resign before 10 years of service won’t be eligible for the Unified Pension Scheme in India.

What are the benefits of the UPS?

The UPS offers several benefits, ensuring stability and support for government employees and their families. Some of them are:

Assured pension: Around 50 percent of the average basic pay (last 12 months) for employees with at least 10 to 25 years of service.
Minimum monthly pension: ₹10,000 for employees with a minimum of 10 years of service upon superannuation.
Assured family pension: 60 percent of the pension will be given to their spouse after the retiree’s demise.
Dearness relief allowance (DA): Similar to other service employees, DA will be added to both the assured pension and the family pension based on the All-India Consumer Price Index for Industrial Workers (AICPI-IW). It will be paid only after the pension starts.
Lump sum payment: This one-time payment on retirement will be calculated as one-tenth of the monthly charge (basic + DA) for every six months of completed service, without reducing any amount of the assured pension.
Government’s role: While employees contribute 10 percent of their salary, the central government will add 8.5 percent of basic pay + DA to the Unified Pension Scheme.

Types of UPS gratuity

Under the Unified Pension Scheme, government employees are eligible for two kinds of gratuity - one paid at retirement and the other offered in case of death during service. Both are one-time payments meant to provide financial relief to the retiree or their family. Let’s discuss each of them in brief:

Retirement Gratuity

The total amount is given to employees who retire after completing at least 5 years of government service. Retirement gratuity is calculated using your basic pay and dearness allowance, with the maximum limit of either 16.5 times your last emoluments or ₹25 lakhs. It’s available on superannuation, early retirement under certain rules, or when an employee transfers into another eligible government role.

Death Gratuity

It is paid to the nominee or family of a government employee who passes away while still in service. It's calculated based on their service tenure—for example, if an employee passes away within a year of their service, their immediate family or nominee receives 2x emoluments. The amount helps the family manage immediate financial needs after the loss.

Comparing the Unified Pension Scheme and the National Pension Scheme

The Unified Pension Scheme (UPS) combines the features of the Old Pension Scheme and the National Pension Scheme (NPS), offering a balanced retirement plan. Unlike NPS, which doesn't guarantee fixed pensions, UPS assures a defined pension—50 percent of the last drawn salary for employees with 25 years of service, along with a minimum pension of ₹10,000 per month after 10 years of service. It also covers family pensions and adjusts payouts for inflation, offering greater security to employees and their families.

To apply for the Unified Pension Scheme, you can fill out form A1 for UPS registration or form A2 for migration from NPS, along with proof of documents. The necessary instructions and all other related forms can be downloaded from: www.npscra.nsdl.co.in/ups.php.