On 19-3-2025, the Pension Fund Regulatory and Development Authority (‘PFRDA’) notified the Pension Fund Regulatory and Development Authority (Operationalization of Unified Pension Scheme under National Pension System) Regulations, 2025 to operationalize the Unified Pension Scheme (‘UPS’) introduced by the Central Government as an option under the National Pension System (‘NPS’) for the employees of the Central Government who are covered under NPS.
Basic information on the Unified Pension Scheme:
The Unified Pension Scheme was introduced by the Ministry of Finance 24-1-2025 vide Notification No. F. No. FX-1/3/2024-PR, dated 24-1-2025, which came into operation on 1-4-2025.
The notification contained the following information regarding the Scheme:
- Applicable to the Central Government employees who are covered under the NPS and who choose the option under NPS.
- Assured Payout will be available only in the following cases:
- in case of an employee superannuating after qualifying service of 10 years, from the date of superannuation;
- in case of the Government retiring an employee (which is not apenalty under Central Civil Services (Classification, Control and Appeal) Rules, 1965) from the date of such retirement;
- in case of voluntary retirement after a minimum qualifying service period of 25 years, from the date such employee would have superannuated, if the service period had continued to superannuate.
Assured Payout will not be available in case of removal or dismissal from service or resignation of the employee. In such cases, the Unified Pension Scheme option shall not apply.
Key Points of Regulations notified by PFRDA:
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Objectives-
- to lay down the framework to operationalize the Unified Pension Scheme notified by the Central Government in the Ministry of Finance;
- to define the obligations, roles and responsibilities of intermediaries and such Central Government offices as are involved with implementation,
- These Regulations come under the ambit of the Pension Fund Regulatory and Development Authority Act, 2013.
- The option to avail benefits under the Unified Pension Scheme will be available to the following category of persons:
- An existing Central Government employee in service as on 1st April 2025, who is covered under NPS;
- A new recruit in the Central Government services, who joins service on or after the 1st day of April 2025;
- A Central Government employee who was covered under NPS and who has superannuated or voluntarily retired or has retired under Fundamental Rules;
- legally wedded spouse in case of a subscriber who has superannuated or retired and has demised prior to exercising the option for Unified Pension Scheme.
- The exercise of option by an eligible employee to be covered under Unified Pension Scheme has to be undertaken:
- Within 3 months from 1-4-2025, or within such extended timelines which is allowed by the Central Government;
- within 30 days, from the date of joining Central Government services or within such extended timelines which is allowed by the Central Government.
The option once exercised will be final and irrevocable.
- Any employee who has opted for the Unified Pension Scheme option under NPS will be identified by a Permanent Retirement Account Number (‘PRAN’) tagged Unified Pension Scheme.
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Individual Corpus:
- Monthly contribution of subscriber will be 10% of the basic pay and dearness allowance thereon, which will be credited to the individual PRAN of Subscriber;
- Monthly contribution of the Subscriber will be matched by the Central Government by crediting an equal amount to the individual PRAN of the Subscriber.
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Pool Corpus will comprise of:
- additional Central Government contribution at an estimated eight and half percent of Basic Pay plus Dearness Allowance, on aggregate basis of all employees who have chosen the Unified Pension Scheme option;
- transfer of balance from the individual corpus of a subscriber;
- any other contribution defined by the Central Government.
- Unified Pension Scheme is a Fund Based System which relies on the regular and timely accumulation and investment of applicable contributions from the employee and the employer.Hence, the assurance of timely and regular payout of benefits under UPS shall depend upon adequacy of funds under individual and pool corpus.
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Benefits of Unified Pension Scheme:
- Lumpsum payment equivalent to one-tenth of last drawn basic pay and dearness allowance for each completed 6 months of qualifying service as certified by Head of Office.
- Assured Payout payable at 50% of the average of the last 12 months Basic Pay immediately prior to the date of superannuation or voluntary retirement or retirement.
- Minimum Guaranteed Payout will be Rs. 10000 per month subject to completion of minimum 10 years of qualifying services by a UPS subscriber.
- Proportionate Payout will be payable on completion of service period of 10 years but less than 25 years.
- Final Withdrawal Payout- Subscriber or the legally wedded spouse will also have an option to withdraw an amount not exceeding 6% of the individual corpus or benchmark corpus, whichever is lower, available in the PRAN as on the date of superannuation or voluntary retirement or retirement.
- Family Payout- Upon demise of a Subscriber who was receiving admissible payout, the legally wedded spouse of such deceased Subscriber will receive, for life, 6% of the amount of the admissible payout drawn by the subscriber immediately prior to the demise,
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Dearness Relief will be payable on the admissible payout and family payout.
The Government has also decided that tax benefits available under NPS will apply mutatis mutandis to Unified Pension Scheme as it is an option under NPS.
These provisions ensure parity with the existing NPS structure and provide substantial tax relief and incentives to employees opting for the Unified Pension Scheme.
The inclusion of Unified Pension Scheme under the tax framework marks another step forward in the Government’s effort to strengthen retirement security for Central Government employees through transparent, flexible and tax-efficient options.
