Central govt employees can opt for Unified Pension Scheme till June 30
An eligible Central government employee will have time till June 30 to join the Unified Pension Scheme (UPS), the Pension Fund Regulatory and Development Authority has specified in a notification. The scheme will become operational from April 1.
The notification has rules for the operationalisation of the scheme, which is designed to have five major benefits: assured pension, assured family pension, assured minimum pension, inflation indexation, and lump sum payment at superannuation in addition to gratuity, all in one comprehensive package. It is available for government servants who have joined the service on or after January 1, 2004, or who will be joining from now on, with the facility of a one-time switch from NPS to UPS. It will also be available on an optional basis to State governments for their employee.
The PFRDA notification said the exercise of the option for an eligible employee to be covered under UPS shall be undertaken within three months from April 1, 2025. New employees who join on or after April 1 will get 30 days to exercise the option. “The option once exercised shall be final and irrevocable,” the notification said. An employee, who is an NPS subscriber and who will retire on or before March 31, 2025, will be eligible to opt for UPS. Also, the legally wedded spouse of a subscriber who has superannuated or retired and passed away before exercising the option for UPS can also join the new scheme.
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Under UPS, while the government contribution will be raised to 18.5 per cent from 14 per cent, there will be no change in the employee contribution, which remains at 10 per cent of basic pay plus DA (Dearness Allowance). The entire pension corpus will be divided into two funds. The first will be an individual pension fund to which the employee contribution and matching government contribution will be credited, and the amount will be invested as per the choice of investment made by the individual employee. The second will be a separate pool corpus with only the additional government contribution (8.5 per cent of basic and DA of all employees) and will be invested separately.
“The UPS, being a ‘fund-based’ system, relies on the regular and timely accumulation and investment of applicable contributions (from both the employee and the employer) for assured payout to the employees post superannuation or retirement, as the case may be. The assurance of timely and regular payout of benefits under UPS shall depend upon adequacy of funds under individual and pool corpus,” the notification said.
For the individual corpus, the UPS subscriber will have an option to choose the pension fund and the investment pattern, including a default pattern. Other than that, a UPS subscriber can choose either Scheme G (invest 100 per cent in Government securities) or any of the two variants of Life Cycle-based schemes. the first variant is the Conservative Life Cycle Fund, with maximum exposure to equity capped at 25 per cent, and the second variant is Moderate Life Cycle Fund, with maximum exposure to equity capped at 50 per cent. “UPS Subscriber shall have an option to change the choice of pension fund once in a financial year and investment choice twice in a financial year,” the notification said.
The Pool Corpus will be allocated to such pension fund(s) as determined by the Central government, which shall invest the funds in accordance with the investment pattern and related aspects, as approved by the Central government. The Authority shall, subject to such instructions, issue investment guidelines to which the pension funds shall adhere, the notification clarified.
