27th August 2024 (13 Topics)

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Unified Pension Scheme (UPS)

Context

The Union Cabinet approved the Unified Pension Scheme (UPS) for central government employees. This scheme will be effective from April 1, 2025, and will benefit 23 lakh central government employees.

What is UPS?

The Central Government has launched the Unified Pension Scheme (UPS), which provides government workers with a steady pension based on their length of service and most recent basic salary drawn.
Key-Features:
- 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.
Eligibility: UPS applies to all those who retired under the NPS from 2004 onwards
Unlike the Old Pension Scheme (OPS), where employees made no contributions, UPS requires employees to contribute 10% of their basic salary and DA, while the government contributes 18.5%. A portion of the government's contribution (8.5%) goes into a guarantee reserve fund to manage any shortfalls.

How is it different from NPS and OPS?

New Pension Scheme (NPS)

Old Pension Scheme (OPS)

Pension Type: Based on the accumulated value of contributions made by both the employee and the government, invested in market-linked securities.
Eligibility: Applicable to all central government employees who joined after January 1, 2004, and continues as an option under the UPS.
Contributions: Employees contribute 10% of their basic salary and DA; government contributes 14%.
Features:
- Pension depends on the accumulated corpus and investment performance.
- No guaranteed minimum pension; benefits are variable and depend on market returns.
- Less predictability in pension amounts compared to UPS.
Implementation Date: Replaced OPS from January 1, 2004.

Pension Type: Provides a guaranteed pension based on a fixed percentage (usually 50%) of the last drawn salary.
Eligibility: Applies to employees who retired before January 1, 2004, or those states that have opted to revert to OPS.
Contributions: No employee contributions required; fully funded by the government.
Features:
- Guaranteed pension of 50% of the last drawn salary.
- Regular dearness allowance adjustments based on inflation.
- No lump sum payments or contributions by employees.
- Implementation Date: Preceded NPS, and has been replaced by NPS in most states; however, some states have reverted to OPS recently.

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GS Analyst: Daily Current Affairs

27th August 2024 (13 Topics)

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Unified Pension Scheme (UPS)

What is UPS?

How is it different from NPS and OPS?

Still Have Questions?

GS Analyst: Daily Current Affairs

Unified Pension Scheme (UPS)

What is UPS?

How is it different from NPS and OPS?

Still Have Questions?

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