The recently introduced Unified Pension Scheme (UPS), which is intended to help government employees without burdening the government, is a new pension plan, not a rollback of NPS, as Finance Minister Nirmala Sitharaman explained.

The recently introduced Unified Pension Scheme (UPS) is a new product, not a rollback of the already-existing New Pension Scheme (NPS) and Old Pension Scheme (OPS), according to Union Finance Minister Nirmala Sitharaman, as PTI reported.

The opposition Congress party was also charged by the finance minister with disseminating false information on the same.

“Not a Retraction”

“It is not a regression; it differs from both NPS and OPS.” This is a brand-new packaging. For the most part, UPS is better and will satisfy government workers. Every estimate fits because of its precise tailoring and the government is not overburdened either, according to Sitharaman.

Since UPS “has a lot of benefits for employees,” she expressed hope that the majority of states will implement it.

“Pension Plan Upgraded”

In response to Congress’s accusations that the Center has reversed course on the pension plan, Sitharaman stated that the government has enhanced the plan, which does not constitute a U-turn.

According to the article, senior Congress leaders have stated that reverting to OPS would be reckless due to the evident difficulties it presents.

“Unlike in the past, Congress now issues statements without conducting in-depth research. They’ve turned into a party that is motivated just by slogans or naara,” she continued.

Additionally, Sitharaman upheld earlier rulings, characterizing them as “tweaking” and “not a rollback,” such as the reinstatement of indexation advantages under the long-term capital gains tax (LTCG).

Details on UPS

  • .The central government has announced UPS for 23 lakh employees. It was approved by the Union Cabinet on August 24.
  • .UPS can be availed only by those central government employees who are currently subscribers of the NPS.
  • .UPS guarantees employees 50 percent of their average basic pay over the last 12 months before retirement as a pension for a minimum qualifying service of 25 years against a market-returns linked payout under the NPS.
  • .Further, the pension will be proportionate for a lesser service period of up to a minimum of 10 years. Also, assured pension of ₹10,000 per month on superannuation after a minimum of 10 years of service.
  • .The scheme has been brought out to address the concerns of government employees over NPS, which came into effect on January 1, 2004.

Variations Using NPS & OPS

Before January 2004, employees who were covered by OPS received a pension equal to 50% of their last drawing basic pay. Under the OPS, employees were not obliged to contribute in any way. Nonetheless, they made payments into the General Provident Fund (GPF). When the employee retired, the total money accrued was given to them, plus interest.

Ten percent is the employee contribution and fourteen percent is the employer contribution under the NPS. Nevertheless, the final payment is contingent upon the market returns on that corpus, which is mostly allocated to government debt.

But since the OPS was more alluring than the NPS, several states that are not BJP-ruled chose to revert to the previous pension plan, which provided a reward according to the state income, instead.

This prompted the Centre to constitute a committee in April 2023, under former Finance Secretary and now Cabinet Secretary-designate T V Somanathan to suggest improvement in the NPS architecture. Unlike the old pension scheme, UPS is contributory in nature, wherein employees will be required to contribute 10 per cent of their basic salary and dearness allowance while the employer’s contribution (the central government) will be 18.5 per cent.