Here is something that could impact pension preferences among Central government employees. The Union government has now extended retirement and death gratuity benefits to those covered under the Unified Pension Scheme (UPS). This marks a major alignment of UPS with the more secure Old Pension Scheme (OPS), offering the much sought after and in-demand financial reassurance to thousands of employees.
The announcement was made as part of a broader update on the Ministry of Personnel’s reforms over the last 11 years. Effective immediately, Central government employees under UPS will be eligible for gratuity payouts under the Central Civil Service (Payment of Gratuity under NPS) Rules, 2021. This will offer them much needed financial support at retirement or in the event of death.
This change comes after years of appeals by staff unions to match NPS-linked schemes with the guaranteed benefits enjoyed under OPS. With this provision, employees under UPS will now receive up to Rs 25 lakh in gratuity. This could significantly improve the financial situation for families during retirement or after the loss of a breadwinner.
The Unified Pension Scheme, notified in January 2025, blends features of both NPS and OPS. It offers 50 per cent of the average basic salary (last 12 months) as a guaranteed monthly pension for those with 25 years of service, and a minimum pension of Rs 10,000 per month for those with at least 10 years. In case of a pensioner’s death, 60 per cent of the pension will go to the family.
Government employees contribute 10 per cent of their salary plus DA, while the government’s contribution has been raised to 18.5 per cent, higher than the 14 per cent under NPS.
Additionally, in cases of death, invalidation, or disability, families of UPS-covered employees will now have the option to revert to OPS, but only if they had chosen the optio before death. This clause ensures that the final wishes of deceased remain binding, steering clear of any posthumous conflicts over pension choices.
The decision is being welcomed as a progressive and employee-centric reform aimed at enhancing social security and retirement certainty, and is expected to encourage wider adoption of the UPS model.
