Notification of Rules for Unified Pension System Issued
The Pension Fund Regulatory and Development Authority (PFRDA) has announced the launch of the Unified Pension Scheme (UPS) under the National Pension System (NPS), effective from April 1, 2025. This new scheme is primarily designed for central government employees who are already covered under the NPS, including retirees.
Key Features of the UPS
- Guaranteed Minimum Pension: The UPS assures a minimum monthly pension payout on retirement, fixed at 50% of the average basic pay received over the last 12 months of service for employees with at least 25 years of service. There is also a guaranteed minimum pension floor of Rs. 10,000 per month for employees with at least 10 years of tenure.
- Contributions: Employees contribute 10% of their basic salary plus Dearness Allowance (DA). Employer contribution under UPS is 8.5% of basic salary plus DA, lower than the 14% in the original NPS.
- Investment and Market Risk: Unlike the traditional NPS, which is market-linked and offers various investment options, UPS offers a hybrid scheme with a guaranteed pension payout, thus removing market risk for employees. However, specifics about investment mix under UPS are not detailed, indicating limited or no choice for fund allocation by employees.
- 50% Equity Investment Rule: The original NPS mandates a maximum of 50% equity exposure in investments for government employees to balance risk and returns. However, it is unclear whether this rule applies or is modified in the case of UPS.
- Implementation Timeline: UPS was notified on January 24, 2025, and became effective from April 1, 2025. Despite its introduction, adoption among the approximately 2.3 million central government employees already on NPS has been low, with only about 1.35% opting into UPS as of July 20, 2025.
- Tax Benefits: Recent Income Tax amendments in 2025 have granted UPS parity with NPS regarding tax benefits on contributions and withdrawals, removing barriers related to tax regulations and treating UPS contributions and benefits similarly to those under NPS.
In summary, the UPS guarantees a minimum pension of 50% of the last 12 months’ average basic pay, effective from April 2025. It differs from NPS in offering a guaranteed pension, reducing market risk for employees. The 50% equity investment rule integral to NPS does not explicitly apply to UPS, as UPS emphasizes assured pension rather than investment-linked returns. However, official clarifications on investment specifics for UPS remain limited as of mid-2025.
Meanwhile, Raj Thackeray, a political leader, has advised his party members not to target Hindi speakers and to avoid confrontations. Additionally, a movie shooting is set to start in Shillong on August 15, and the Indian government is planning to establish a green finance body to support its net-zero goal.
- Despite the launch of the Unified Pension Scheme (UPS) in the finance industry, its adoption among central government employees has been rather low, with only about 1.35% opting into the scheme as of July 2025.
- As part of the green initiatives, the Indian government is planning to establish a green finance body to attract investments in the business sector that support its net-zero goal.
