Starting April 1, 2025, the Unified Pension Scheme (UPS) will be followed. Employees of the Central Government will also have 50% guaranteed pension. Below are the complete details, eligibility, benefits, and how to apply for the UPS.
What is the New Pension Scheme ?
Starting April 1, 2025, the Unified Pension Scheme (UPS) will be launched, which aims to ensure financial stability for central government employees post-retirement. The Pension Fund Regulatory Authority of India (PFRDA) will oversee the new system. Under this program, employees will benefit from guaranteed pensions.
Who Benefits from UPS?
- Employees already under the National Pension System (NPS) who remain in service until April 1, 2025, will be eligible for UPS.
- New government workers entering after April 1, 2025 will also be covered.
- However, employees who have been fired, dismissed, or resigned will not be eligible.
UPS vs. NPS: Key Differences
The Old Pension Scheme (OPS) was replaced by the National Pension Scheme (NPS) in 2004. The NPS linked pensions to market-related returns, where pension funds were invested in government bonds and the stock market. Returns from these investments were used to pay pensions.
However, the Unified Pension Scheme (UPS) will guarantee a defined minimum pension, making it different from NPS.
What Benefits Will New Pension Scheme Offer?
- 50% pension based on the average pay over the last 12 months.
- Eligibility: Employees who have worked for at least 25 years.
- Employee Contribution: 10% of Basic Salary plus Dearness Allowance (DA).
- Government Contribution: The government will contribute 18.5% of the employee’s basic salary and DA.
Where Can New Pension Schem Forms Be Accessed?
From April 1, 2025, government employees wishing to join the Unified Pension Scheme (UPS) can access the online application form on the official Protean CRA website. Additionally, offline application facilities will be available.
The Central Government officially accepted this plan on August 24, 2024, with the goal of providing government employees with a stable source of income after retirement.
New Pension Scheme (NPS) – What to Expect from April 1, 2025?
The New Pension Scheme (NPS) is a retirement savings plan designed to ensure financial stability for government employees beyond retirement, providing a reliable source of income.
Also Read:- Salary Hike: Central Government Raises 30% Pay – Enjoy a Big Boost in DA & Pension!
Eligibility for the New Pension Scheme
The New Pension Scheme (NPS) applies to:
- Employees of the Central Government joining after April 1, 2025.
- Workers under various public sector agencies, departments, and ministries.
- Employees not covered by any other pension plan prior to joining the government.
What Makes the New Pension Scheme Different?
The key features of the revised pension plan include:
- Employee Contributions: Employees contribute a portion of their salary to the plan voluntarily.
- Government Matching: The government will match a specific percentage of the employee’s salary.
- Personal Accounts: Each employee will have a personal pension account, managed by assigned fund managers.
- Portability: Pension benefits can be transferred if employees change jobs or departments.
Employee Contribution Percentages Under the New Pension Scheme
- Employee Contribution: 10% of basic pay plus DA.
- Government Contribution: The government will contribute 10% of the employee’s basic pay and DA.
- Voluntary Contributions: Employees can make additional voluntary contributions if desired.
Benefits of the New Pension Scheme
The New Pension Scheme (NPS) offers the following benefits:
- Pension: Employees will receive a pension based on the total amount accumulated in their personal pension accounts by the time of retirement.
- Tax Benefits: Contributions to the NPS are eligible for tax deductions under Section 80C and Section 80CCD.
- Potential Returns: Returns from investments in various asset classes like equity, corporate bonds, and government securities.
How Will the Pension Be Computed Under the New Pension Scheme?
The pension will depend on:
- The total amount accumulated in the individual’s pension account.
- The age at retirement and the rate of return on investments made while employed.
- Employees can choose to annuitize part of their accumulated corpus to receive consistent pension payments in retirement.
Will Current Government Employees Be Included in This New Pension Program?
No, the New Pension Scheme will only apply to employees who join the government after April 1, 2025. Current employees will remain under the existing pension policies unless they opt to switch to the new system.
Differences Between the New Pension Scheme and the Old Pension Scheme
- Old Pension Scheme (OPS): The pension was a fixed percentage of the last drawn pay, with no employee contribution.
- New Pension Scheme (NPS): The pension is based on the amount accumulated in the employee’s personal pension account, with contributions from both the employee and the government.
Can Employees Withdraw the Pension Corpus Before Retirement?
No, early withdrawals are not allowed under the NPS. However, employees may make partial withdrawals under specific conditions, such as for education, medical treatment, or housing.
What Happens if an Employee Leaves the Government or Switches Jobs?
- Portability: The NPS is portable, meaning employees can continue contributing to the same pension account or transfer the funds to their new employer.
- Early Exit: Employees may opt for early exit under certain conditions, but this could result in a penalty or reduced pension.
What Happens If an Employee Does Not Participate in the New Pension Scheme?
If employees fail to participate, they will not accumulate any pension funds, which means they might not have a sufficient corpus to receive a pension upon retirement. Participation is mandatory to build a retirement corpus.
Will Market Changes Affect the New Pension Scheme?
Yes, the NPS is linked to market returns, meaning the funds will be invested in various financial instruments like bonds, equities, and government securities. This will impact the final pension value based on the performance of these investments.
How Can Employees Monitor Their Pension Accounts?
Employees can access their pension accounts online, where they can:
- Check the balance of their pension account.
- Track investment performance.
- Modify asset allocation preferences.
- Request other services, including withdrawals.
Can Employees Opt-Out After Joining the New Pension Scheme?
No, employees cannot opt out once they join the New Pension Scheme. The program is mandatory for eligible government employees joining after April 1, 2025.
Where Can Employees Get More Information About the New Pension Scheme?
Employees can visit the official pension portal or consult with the HR or finance division within their respective ministries or departments for additional information.
