Unified Pension Scheme: New Regulations, Eligibility, and Key Features

News:

MAS Team | 28 March 2025

The Pension Fund Regulatory and Development Authority (PFRDA) has issued a gazette notification outlining the framework for the much-anticipated Unified Pension Scheme (UPS). Set to take effect from April 1, 2025, UPS will be an option available to central government employees currently enrolled in the National Pension Scheme (NPS). Below is an overview of the key aspects of this scheme.

According to the notification, the following individuals are eligible to join UPS:

Current central government employees under NPS as of April 1, 2025.
Newly recruited central government employees from April 1, 2025, with a mandatory option selection within 30 days of joining.
Retired central government employees who were covered under NPS and retired before March 31, 2025, under superannuation, voluntary retirement, or Fundamental Rules 56(j) (without penalty).
he legally wedded spouse of a deceased subscriber who retired before exercising the UPS option.

Employees in the first and third categories must decide within three months of 1 April 2025. Once selected, the UPS option is final and cannot be reversed. Additionally, those opting for UPS will not be eligible for any future concessions, policy changes, financial benefits, or parity with retirees under different schemes.

Under UPS, employees will contribute 10% of their basic pay and dearness allowance (DA), which the government will match. Additionally, the government will contribute an estimated 8.5% of the employee’s basic pay and DA to ensure assured payouts.

Subscribers must have a minimum of 10 years of qualifying service to be eligible for a guaranteed payout of Rs10,000 per month.

UPS subscribers can either follow a default investment pattern or select from pension funds registered with PFRDA. If no active selection is made, the default pattern applies. Employees can change their pension fund choice once per financial year and their investment strategy twice per year.

Investment options include:

Scheme G: 100% allocation in government securities.
Life Cycle Funds:
Conservative (max 25% in equity)
Moderate (max 50% in equity)

Since UPS is a contributory scheme, any shortfall in the corpus may lead to a reduction in the final payout unless replenished by the subscriber before retirement. Subscribers may withdraw up to 60% of the lower of individual or benchmark corpus upon retirement. If the individual corpus exceeds the benchmark, the excess will be credited to the subscriber’s designated bank account.

Subscribers can make partial withdrawals of up to 25% of their own contributions after a three-year lock-in period. This is permitted a maximum of three times and is limited to purposes such as purchasing or constructing a residential property. If the subscriber already owns a house (except ancestral property), withdrawals for this purpose are not allowed.

Additionally, periods where contributions were not received—such as during deputation or foreign service—will not count towards the minimum 10-year qualifying service requirement.

The Finance Ministry has clarified that the full assured payout will be 50% of the average basic pay over the 12 months before superannuation. A full payout is available after 25 years of service, while shorter service periods will result in proportional payouts.

If a subscriber retires after at least 10 years of service, a minimum assured payout of Rs10,000 per month is guaranteed, provided contributions are timely and withdrawals are not made. For those taking voluntary retirement after 25 years of service, the payout will begin from their notional superannuation date.

The following categories of employees will receive an assured payout under UPS:

Retiring after at least 10 years of service – Payout begins from the date of superannuation.
Retiring under Fundamental Rules 56(j) – Payout starts immediately upon retirement.
Voluntarily retiring after 25 years – Payout starts from their scheduled superannuation date.

Employees who resign, are dismissed, or retire before completing 10 years of service will not be entitled to assured payouts.

Upon the payout holder’s death after superannuation, their legally wedded spouse will receive 60% of the last payout. This applies to spouses married at the time of superannuation or retirement.

It is is currently applicable only to central government employees, while state governments must decide separately on its adoption. The scheme offers a better investment choice for employees due to the inclusion of private pension fund managers. However, annuity service providers will face challenges since they are excluded from the UPS framework.

Dear Investor,
In case of any grievance / complaint :

Please contact Compliance Officer Pankaj Raheja at [email protected] and Phone No. - 91-22-35131664.
You may also approach CEO Debashis Basu at email- id [email protected] and Phone No. - 91-22-35131664.