A Complete Guide On Unified Pension Scheme (UPS)

Pragya Pathak

Author

Updated: 16-04-2025 at 12:36 PM

One of the most significant components of an individual’s life is financial security, especially when one reaches old age. One way of ensuring the same financial security is through pension schemes.

The government of India launched the Unified Pension Scheme (UPS) as an amalgamation of all the components of the Old Pension Scheme and National Pension Schemes. However, people have a choice between switching from the National Pension Scheme (NPS) to the Unified Pension Scheme.

Read the article to learn about the features, eligibility, returns of UPS, and other necessary information to make a fair judgment of the new system.

Overview

Name of the scheme	Unified Pension Scheme (UPS)
Launched by	Government of India
Will implement on	April 1st 2025
Target group	Central govt employees
Employee contribution	10% basic salary + Dearness Allowance (DA)
Employer contribution	18.5% basic salary + Dearness Allowance (DA)

What Is The Unified Pension Scheme?

The Unified Pension Scheme (UPS) was announced on August 24th, 2024, and will be implemented on April 1st, 2025. The objective of its introduction was simply to fill the gaps between the Old and National pension schemes and make the pension system efficient and smoother.

UPS is not a mandatory system as people can people choose between switching from the NPS to UPS. It is a very flexible system that state governments can also choose to adopt or not. The state of Maharashtra was the first state to implement UPS for state govt employees.

Features

Several key features of the Unified Pension Scheme make it better than the other models of pension schemes. Some of its major features are:

Hybrid Model: UPS follows a combination of the defined benefit and the defined contribution models to enhance the quality of the pensioners’ schemes by guaranteeing a fixed amount and also collecting revenue from both the government and the employees.
Flexibility: UPS is comparatively more flexible and portable as it allows the employees to carry their benefits of the pension in different government and private sector jobs. It doesn’t restrict the employees to work for the government only.
Social Security: UPS may also incorporate the features of social security so that everyone can avail the benefits of the pension scheme and secure their future.
Sustainable: UPS follows both the approaches used by the OPS and the NPS which makes it sustainable.

Benefits

The Unified Pension Scheme offers several benefits to the govt employees. Some of its major benefits are mentioned below:

Fixed pension: Employees retiring after completing a service of 25 years are entitled to a pension amount of 50% of their average basic pay drawn over a year before retirement. Employees with 10 years of service are entitled to receive Rs. 10,000 monthly as a fixed pension.
Transfer of pension: After the unfortunate death of a pensioner, the spouse of the pensioner is entitled to receive 60% of the pensioner’s pension.
Dearness Allowance (DA): UPS provides DA to employees as it considers inflation as a crucial factor that can affect people’s lives. Dearness Relief will be based on the All India Consumer Price Index for Industrial Workers (AICPI-IW) same as service employees.

Eligibility Criteria For Unified Pension Scheme

Interested individuals first need to ensure whether they fit the eligibility criteria. The eligibility criteria for the Unified Pension Scheme are as follows:

Govt employees who have been working for at least 10 years are entitled to receive a fixed amount of pension.
Govt employees who have completed at least 25 years of service are entitled to receive a percentage of their average basic pay as pension.
Govt employees who are under the NPS and also those opting for the Voluntary Retirement Scheme (VRS) under NPS.

Minimum Amount Under Unified Pension Scheme

As per UPS, employees who have been working for at least 10 years are entitled to receive a minimum pension amount of Rs. 10,000 per month.

Returns Of The Unified Pension Scheme

The employees registered under UPS are provided with a fixed monthly income. The employee and employer contributions are mentioned below:

For employees who have been working for at least 10 years: Employers will contribute 18.5% of the basic salary with Dearness Allowance (DA) and employees will contribute 10% of the basic salary with Dearness Allowance (DA) monthly.
For employees who have worked for 25 years: 50% of their average basic pay drawn a year before retirement will be provided as the pension amount.

How Would The Pension Be Calculated Under The UPS?

The UPS will be effective from the 1st of April, 2025 and to avail of its benefits the
employee should have a minimum of 25 years of service experience; however, employees who have served for at least 10 years are entitled to receive 10000 monthly. The amount of the pension will be half (50%) the average of one’s salary over a year. In case of unfortunate deaths of the pensioner, the family will receive 60% of the pension amount.

Can One Switch From UPS To NPS?

Employees are given the freedom to choose between switching from NPS to UPS. However, if an employee does switch, they cannot go back to NPS again. The government of India has specifically stated that such a reversal wouldn’t be possible.

Disadvantages Of The Unified Pension Scheme

The Unified Pension Scheme offers several benefits but it has some disadvantages as well. Some of the major disadvantages are mentioned below:

Employee contribution: UPS requires contributions from the employees as well which can be hectic for the employees.
Complex switching process: The process of switching from NPS to UPS is complex and not laid out for interested employees.

Also Read: Is The Government Restoring The Old Pension Scheme Back?

Differences Between OPS, NPS, & UPS

Features	Old Pension Scheme (OPS)	National Pension Scheme (NPS)	Unified Pension Scheme (UPS)
Model Used	Defined Benefit Model	Defined Contribution Model	Hybrid (combination of defined benefit & defined contribution models)
Guaranteed Pension	Given based on the last drawn salary	No guarantee	Guaranteed pension
Amount of the pension	Fixed	Variable	Guaranteed amount with an interest on the contributions made on investment
Inflation	Given through dearness allowance	Not given especially	Likely to incorporate
Coverage	Only for government employees	Mandatory for govt. employees except those in the armed forces and optional for others	For both govt and private-sector employees
Portability	No portability	Limited portability	Pension can be taken to different sectors

Conclusion

The govt of India launched the Unified Pension Scheme with just one aim and that was to fill the gaps that existed in the old models. However, people didn’t like the change offered under UPS and hence, the government never mandated it. Eligible govt employees need to have a deeper understanding before making a final decision about the pension schemes.

You can also reach out to Jaagruk Bharat through their community page with any questions that you might come across.