New pension scheme approved; know what’s in it for you

New pension scheme: The Union Cabinet has approved a new pension plan, guaranteeing 50% of the average basic salary as a pension for 23 lakh government employees who joined under the National Pension System (NPS).

This decision applies to employees who started service after April 1, 2004, transitioning from the previous defined benefit scheme to a contribution-based system.

Information and Broadcasting Minister Ashwini Vaishnaw announced that under the newly introduced Unified Pension Scheme (UPS), government employees will now receive 50% of their average basic pay, calculated over the last 12 months before retirement, as their pension.

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To qualify for this full pension, an employee must have completed 25 years of service. For those with less than 25 years but more than 10 years of service, the pension amount will be proportionally reduced.

Employees currently enrolled in the NPS can opt into the UPS, which will take effect at the start of the next financial year.

This change follows the recommendations of a committee led by Finance Secretary TV Somanathan, which was formed last year by the finance ministry to review the pension scheme for government employees.

The UPS is set to begin on April 1, 2025. It will benefit those who retire by March 31, 2025, with any owed payments being retroactively applied. This move comes as several non-BJP states have chosen to revert to the DA-linked Old Pension Scheme (OPS), a demand also being raised by employee organizations in various other states.

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This change comes in response to growing demands from various employee organizations and several non-BJP-ruled states, which have opted to return to the older, DA-linked pension system, highlighting the ongoing debate over pension benefits for government employees.