NEW DELHI: Given the modest start of Unified Pension Scheme (UPS), the finance ministry has written to the pay & accounts offices (PAOs) of central ministries, urging them to take steps to expedite its roll-out. The finance ministry proposed that staff be sensitised to undertake their assigned roles and responsibilities for time-bound implementation of the UPS.
The UPS, which was opened as an alternative for the market-linked National Pension System (NPS) on April 1, has made a weak start. Pension of 50% of the last 12 months’ average pay is guaranteed under UPS.
With the central government staff weighing the cost-benefit between NPS and UPS, in the first two weeks since the option became available, just a little over 1,500 central government employees have opted for UPS. That was 0.05% of the 2.7 million central government staff enrolled in NPS since it was rolled out in 2004.
Of course, these are still early days, and the window for joining the pension scheme will be open till June 30 for the existing staff or those retired before March 31, 2025. For new employees joining the central government from April 1, they have to make a choice whether to join UPS or not within 30 days. The option once exercised would be final and irrevocable.
The enrollment and claim forms for all these categories of central government employees is available online from April 1, 2025, on the website of Protean Central Recordkeeping Agency or CRA (https://npscra.nsdl.co.in). The employees also have the option to submit the forms physically.
“The Drawing and Disbursing Officers (DDOs) are required to login/activate/reset their login credentials in coordination with CRA, so that they can perform the activities under UPS through CRA system,” the Controller General of Accounts said in an office memorandum.
No capital return option under UPS, longevity of service and higher individual corpus under NPS are among factors being debated by the employees before making up their mind on the switch. The timeline can be extended if required.
UPS will provide assured pension of 50% of last drawn salary (average basic pay of last 12 months of service) upon superannuation for all employees completing minimum 25 years of service, with value of such deferred compensation fully indexed to inflation.
According to the extant NPS norms, a maximum of 60% of the accumulated NPS corpus from contributions during a person’s working years is allowed to be withdrawn tax-free at the time of retirement. The subscriber has to invest a minimum of 40% of the corpus in annuities for a regular pension.
In the current NPS architecture, a subscriber may purchase units with the return of purchase price (capital), in which case she may get lower returns. In UPS, however, there aren’t any such options. Once the death of the dependent, annuity will cease, and no further payment or capital return is required as it is a joint life annuity without return of purchase price.
Under UPS, the employee contribution shall remain unchanged at 10% (of basic pay + DA). The government’s contribution will increase from the present 14% (under the market-linked national pension system) to 18.5%.
If a government subscriber withdraws up to 60% of the corpus in a lump sum after superannuation from the individual account (built from 20% of basic pay +DA) under UPS, there will be a proportionate reduction in the guaranteed pension. In the case of NPS, if the withdrawal is 60%, the balance 40% corpus could be bigger, given that the corpus is built from a monthly contribution of 24% (Centre 14% + employee 10%) compared to a 20% corpus in the individual UPS account of the subscriber.
Source: The Financial Express
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