
Unified Pension Scheme Explained: 5 Salient Features – Assured Pension to Inflation Indexation
Posted on Thursday, January 23rd, 2025 | By IndusInd Bank
Government employees now have a new pension scheme they can opt for – the Unified Pension Scheme (UPS). Introduced in August 2024 and set to be implemented by April 2025, UPS combines elements of both, the National Pension System (NPS) and the Old Pension Scheme (OPS). While it takes inspiration from the two, UPS goes a few steps further in regard to post-retirement benefits.
Here is the Unified Pension Scheme explained, via five features that make it an essential tool for a worry-free retirement for government employees
5 Important Features of the Unified Pension Scheme
Here are a few important Unified Pension Scheme features that make it stand out for future retirees.
1. Assured Pension
One of the major benefits of the UPS is the guaranteed pension provided to employees who have served for at least 25 years. Under UPS, retirees are entitled to receive 50% of their average basic pay from the last 12 months of service. Those with a service duration of less than 25 years (up to a minimum of 10 years) also receive a pension payout proportionate to their years of service.
This assured pension ensures that the beneficiaries will receive a stable income throughout their retirement.
2. Assured Minimum Pension (For Employees with Less than 25 Years of Service)
Even for those employees who have served fewer than 25 years, the Unified Pension Scheme provides an assured minimum pension. Employees with at least 10 years of service are guaranteed a pension of ₹10,000 per month upon retirement. So, even those government employees who have not completed long-term service still receive adequate financial support post-retirement.
3. Assured Family Pension
Another critical feature of the UPS is the family pension provision. In the event of the pensioner’s death, the surviving family members are guaranteed 60% of the pension amount. This feature ensures that even in the absence of the pensioner, their family receives continued financial support.
4. Inflation Indexation
One of the Unified Pension Scheme features that helps maintain the purchasing power of the pension is inflation indexation. The scheme offers protection against rising inflation rates by adjusting pensions in line with the All India Consumer Price Index for Industrial Workers (AICPI-IW). This can allow pensioners to maintain their standard of living throughout their retirement.
5. Lump Sum on Superannuation
Upon retirement, the Unified Pension Scheme offers a lump-sum payout to retirees. This payment is equivalent to one-tenth of their last drawn monthly emoluments for every six months of service. Receiving this lump sum will not have any effect on the pension corpus/amount.
Additionally, retirees are entitled to receive gratuity. This combination means that retirees can start their retirement years with a solid financial backup. They do not have to dip into their pension right away either.
The Unified Pension Scheme is an essential tool in your long-term financial planning arsenal. However, to complement a retirement plan like UPS, having the right savings account is equally crucial.
The Importance of a Savings Account in a Financial Portfolio with UPS
- With the right savings account, you not only enjoy liquidity for day-to-day expenses but also get a safe repository for emergency funds and retirement savings.
- In addition, banks like IndusInd Bank offer a competitive savings account interest rate to help grow your savings over time.
- For government employees, who will receive regular pension payouts, a savings account can act as the base for their financial planning. It can help them manage funds, pay bills, and even invest in other financial instruments.
- And with options like a Zero Balance Savings Account by IndusInd Bank, you can enjoy these benefits without worrying about minimum balance requirements.
Thus, with a mix of UPS and a savings account, you are building a safety net that ensures both short-term liquidity and long-term financial health.
Also Read: Why Does Every Indian Need a Savings Account?
Conclusion
The Unified Pension Scheme will serve as a solid retirement plan for government employees. With features like guaranteed pensions, family benefits, and inflation protection, the UPS will ensure that retirees no longer worry about finances. Instead, they can focus on rest, relaxation, and spending time with their loved ones.
Integrating such a plan with a well-designed savings account ensures that you have daily flexibility as well as long-term planning in your portfolio. While the UPS corpus takes years to build, you can open a bank account with IndusInd Bank within minutes. The entire process is online, and you can get started right away! So, open a bank account with IndusInd Bank today and secure your financial future!
Disclaimer: The information provided in this article is generic and for informational purposes only. It is not a substitute for specific advice in your circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for making any financial decisions based on the contents and information.