The key points are:
- The UPS will replace the New Pension Scheme (NPS) and provide government employees with an assured pension post-retirement, unlike the NPS which was a defined contribution scheme.
- The UPS will come into effect from April 1, 2025 and will be applicable to all those who have retired under the NPS from 2004 onwards.
- The UPS incorporates the best elements of both the Old Pension Scheme (OPS) and the NPS, providing a fixed pension amount while still being a funded contributory scheme.
- The UPS is expected to cost the exchequer around Rs 6,250 crores in the first year of implementation.
A) What were the key differences between the NPS and the OPS that led to opposition against the NPS?
The NPS replaced the OPS with a basic pay pension, funded by employee contributions (10% of basic salary and DA), and a matching government contribution, contrasting with the OPS’s fixed pension. The NPS offers varying risk profiles, unlike the OPS, which provides fixed assured pensions, exposing employees to market risks and offering lower assured returns. The NPS, unlike the OPS, offers lower assured returns and requires employee contributions, causing opposition among government employees due to its lower pension level.
B) Why was the NPS introduced in 2004 as a replacement for the OPS?
The NPS was introduced in 2004 as a replacement for the OPS, an unfunded pension scheme, in India, due to its fiscally unhealthy and unsustainable levels, as the OPS lacked a specific pension corpus.
Also, The NPS, a defined contribution scheme, aims to address fiscal challenges posed by the OPS by providing a more sustainable pension system for government employees, funded by employee and matching government contributions.
C) How will the UPS differ from the OPS and the NPS in terms of the pension benefits provided to government employees?
The UPS, unlike the NPS, provides retirees with a specific pension amount, addressing a major complaint from government workers regarding the NPS.
Union Minister of Information and Broadcasting Ashwini Vaishnaw claims that the UPS has the following five essential features:
The UPS offers an assured pension(1), which is proportionally reduced for shorter service periods up to ten years, a minimum pension(2) of Rs 10,000 per month, and an assured family pension(3), which provides 60% of the employee’s pension upon death. The pensions mentioned will be subject to dearness relief based on the All India Consumer Price Index for Industrial Workers, similar to serving employees.
In addition to gratuity, lump sum payout at superannuation is computed as one-tenth of the monthly emoulment (salary + dearness allowance) for each six months of completed service.In addition to gratuity, lump sum payout at superannuation is computed as one-tenth of the monthly emoulment (salary + dearness allowance) for each six months of completed service.
