The Central Government has announced a significant reform in the pension system with the introduction of the Unified Pension Scheme under NPS (National Pension System). This initiative aims to provide better retirement benefits and greater financial security to Central Government employees covered under the National Pension System. Below, we delve into the details of this groundbreaking scheme.
Key Features of the Unified Pension Scheme under NPS
The Unified Pension Scheme under NPS is designed to ensure assured payouts for eligible employees. Here are the primary features:
Eligibility Criteria
Assured payouts will be available under the following conditions:
Employees superannuating after completing a minimum of 10 years of service.
Employees retired under the provisions of FR 56(j), which is not a penalty under the Central Civil Services (Classification, Control, and Appeal) Rules, 1965.
Voluntary retirement after a qualifying service of at least 25 years, with payouts commencing from the date the employee would have superannuated had the service continued.
The scheme does not apply to employees removed or dismissed from service or those who resign.
Assured Benefits
The Unified Pension Scheme under NPS offers:
A full assured payout of 50% of the average basic pay (over the last 12 months) for employees with at least 25 years of service.
Proportionate payouts for employees with less than 25 years of service.
A guaranteed minimum payout of ₹10,000 per month for employees with 10 or more years of service.
Family payouts at 60% of the assured payout in case of the demise of the payout holder after superannuation.
Dearness Relief will be provided on assured payouts and family payouts, calculated similarly to Dearness Allowance for active employees. Additionally, a lump-sum payment equivalent to 10% of basic pay and Dearness Allowance for every completed six months of service will be granted.
Contribution Structure
The Unified Pension Scheme under NPS involves:
Employee contributions of 10% of basic pay plus Dearness Allowance.
Matching contributions from the Central Government at the same rate.
An additional contribution by the Central Government, estimated at 8.5% of basic pay plus Dearness Allowance, to a pooled corpus supporting assured payouts.
Investment Choices
Employees can choose investment options for their individual corpus, regulated by the Pension Fund Regulatory and Development Authority (PFRDA). A default investment pattern will apply if no choice is exercised. Investment decisions for the pooled corpus will remain with the Central Government.
Transition for Existing Employees
Employees currently under the National Pension System can opt for the Unified Pension Scheme under NPS. Once this option is chosen, it becomes final. Existing NPS corpus amounts will be transferred to individual corpora under the new scheme.
Operational Mechanism of the Unified Pension Scheme under NPS
The scheme emphasizes regular and timely contributions for assured payouts. Upon retirement or superannuation, employees must authorize the transfer of their individual corpus value to the pooled corpus. The transferred amount should align with a benchmark corpus value, determined by the PFRDA.
If the transferred value is lower than the benchmark, payouts will be proportionate. Conversely, if the transferred value exceeds the benchmark, the excess will be credited to the employee.
Provisions for Past Retirees
The Unified Pension Scheme under NPS extends benefits to employees who retired before the scheme’s operational date. These retirees will receive arrears, with interest calculated at Public Provident Fund rates. Adjustments will be made for withdrawals and annuities already paid.
Additional Provisions
The scheme ensures clarity on assured payouts for employees facing disciplinary proceedings at superannuation or post-retirement. Specific regulations for such cases will be notified separately.
Effective Date and Regulatory Framework
The Unified Pension Scheme under NPS will come into effect on April 1, 2025. The PFRDA will issue detailed regulations to operationalize the scheme, ensuring its smooth implementation.
Conclusion
The introduction of the Unified Pension Scheme under NPS marks a transformative step toward enhancing the retirement benefits of Central Government employees. By integrating assured payouts and flexible investment options, the scheme provides a robust framework for financial security post-retirement. This initiative underscores the government’s commitment to improving the welfare of its employees.
As the Unified Pension Scheme under NPS rolls out, it is expected to set a new standard in pension systems, balancing employee welfare with sustainable fund management. Central Government employees are encouraged to explore this option for a secure and stable retirement future.
