Central Government Employees Under the Unified Pension Scheme (UPS) Can Now Enjoy Pension and Gratuity Benefits Akin to the Old Pension Scheme (OPS)
Central Government Employees Qualified for Old Pension Scheme Benefits in Specific Scenarios: Clarification Provided by the Government on OPS
In a relief for central government employees who shifted from the National Pension System (NPS), the government has made it clear that workers covered under the Unified Pension Scheme (UPS) can also enjoy various perks previously tied to the Old Pension Scheme (OPS). According to the announcement, if an employee unexpectedly passes away during work or suffers a severe illness or accident, their family will be entitled to similar advantages as provided under the OPS.
The Department of Pension and Pensioner’s Welfare (DoPPW) issued a circular explaining that the government has "granted instructions allowing Central Government civil employees covered under Unified Pension Scheme (UPS) the option to avail benefits of the Old Pension Scheme under the CCS (Pension) Rules, 2021, or the CCS (Extraordinary Pension ) Rules, 2023 in the event of the death of government employees or his discharge from service on account of invalidation or disablement."
Last month, the authorities issued an order offering a one-time choice to all IAS, IPS, and IFS officers under the NPS to select the OPS in specific scenarios.
Pension and Gratuity Benefits Under UPS
This move comes as a welcome respite for central government employees moving to the UPS. Now, these workers will be eligible for retirement and death gratuity benefits on par with the OPS. The government made this decision to meet a long-standing demand from employees.
The Ministry of Personnel confirmed that employees under UPS will now receive gratuity as per Central Civil Services (Payment of Gratuity under NPS) Rules, 2021, which means they will also be eligible for up to Rs 25 lakh in gratuity, as is available under the OPS.
One-Time Option for NPS Employees to Switch to UPS
Interestingly, the central government has added the UPS as an optional scheme under the NPS, and this change will take effect from April 1, 2025. As a result, employees currently in the NPS will have a one-time chance to choose UPS.
Minister of State for Personnel Jitendra Singh described this decision as the government's commitment towards the social security of employees. He stated that this action eliminates pension-related inequality and safeguards the interests of employees.
Secretary of the Ministry of Personnel, Public Grievances, and Pensions V. Srinivas emphasized this step as progressive and noted that it guarantees pension benefit equality between UPS and NPS employees.
It is worth noting that in 2021, the government implemented the Central Civil Services (Implementation of National Pension System) Rules, whereby employees could opt for either NPS or OPS in the event of death or disability under Rule 10.
Ranbheer Singh Dhariwal, Group Head - Social Security & Welfare, Protean eGov Technologies Ltd, said, "Extending retirement and death gratuity benefits to employees under the UPS is a significant stride towards enhancing financial security for government employees. This also highlights the significance of a robust pension system in safeguarding employees' futures. This aligns UPS more closely with the objectives of a comprehensive, secure, and transparent pension framework. It underscores the government's commitment to strengthening retirement security for millions of current and future central government employees."
Opting for UPS and OPS-like Benefits
- Exercising the Option: Employees joining central government service under UPS or transitioning from the National Pension System (NPS) to UPS must exercise an option regarding their pension benefits. This is done formally through a declaration using Form 1 at the time of joining service or switching schemes, where they can choose to avail benefits under:
- The National Pension System (NPS), or
- The All India Services (Death-cum-Retirement Benefits) Rules, 1958, or
- The Central Civil Services (Extraordinary Pension) Rules, 2023 (which provide for OPS-like benefits in the event of death, invalidation, or disablement).
- Death and Disability Benefits: If an employee covered under UPS dies during employment or is discharged due to serious disability or invalidation, their family will be entitled to similar benefits as under the OPS. This means their family will receive the death-cum-retirement gratuity and pension in accordance with the OPS provisions instead of obtaining UPS or NPS corpus-based payouts.
- Pension Benefits: Employees working for 25 years or more under UPS will be entitled to a pension payout of 50% of their average monthly salary for the last 12 months. Notably, the pension payout is guaranteed as a fixed benefit similar to the defined benefit structure of the OPS, unlike the market-linked benefits under NPS. For service between 10 and 25 years, the pension payout is proportional to the length of service, with a minimum pension payable after 10 years of service.
- One-Time Switching Option: The government has also provided a one-time opportunity for certain officers (such as IAS, IPS, and IFS) to switch from NPS to OPS-like benefits offered by UPS before the deadline (June 30, 2025). This amendment was designed to address apprehensions regarding the uncertainties of NPS returns and annuity rates.
[1] DoPPW Circular - Extension of option to Central Government civil employees covered under Unified Pension Scheme[2] Central Civil Services (Implementation of National Pension System) Rules, 2021[3] Pension for Central Government Employees: Govt Extends Option to Employees Covered Under Unified Pension Scheme to Opt for Old Pension Scheme Benefits[4] ALL INDIA SERVICE CADETS OFFICERS' WELFARE ASSOCIATION, VIJAYAWADA - DISTRICT UNIT[5] Retirement benefits of employees who have opted for National Pension System
- Central government employees covered under the Unified Pension Scheme (UPS) are now eligible for retirement and death gratuity benefits on par with the Old Pension Scheme (OPS), as a move to meet employee demands and enhance their financial security.
- The Ministry of Personnel has confirmed that employees under UPS will receive gratuity as per Central Civil Services (Payment of Gratuity under NPS) Rules, 2021, allowing them to be eligible for up to Rs 25 lakh in gratuity, similar to the OPS.
- Starting April 1, 2025, the central government has added the UPS as an optional scheme under the National Pension System (NPS), providing employees a one-time chance to choose UPS.
- To avail of OPS-like benefits under UPS, employees must exercise an option formally through a declaration using Form 1, choosing between NPS, All India Services (Death-cum-Retirement Benefits) Rules, 1958, or Central Civil Services (Extraordinary Pension) Rules, 2023 for pension benefits, or opting for similar benefits in case of death or disability.
