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Informist, Monday, Aug. 4, 2025

 

--Fin min source: May tweak unified pension plan norms to attract subscribers

--Fin min source: May give more tax incentives to push unified pension plan

--Fin min source: To soon run awareness campaign to push unified pension plan

 

By Sagar Sen and Priyasmita Dutta

 

NEW DELHI - In a bid to make the Unified Pension Scheme more appealing for central government employees, the finance ministry plans to make a few changes to the current norms, including lowering the minimum qualifying service period to avail benefits in case of voluntary retirement, a senior finance ministry official said. The government also plans to run nationwide awareness campaigns to popularise the pension plan, the official added.

 

"We may reduce the minimum qualifying service period in cases where employees take voluntary retirement from the current 25 years of service to 20 years," the official told Informist. As per the existing norms, government employees are eligible to get benefits of the Unified Pension Scheme after a minimum qualifying service period of 25 years in case of voluntary retirement.

 

Under the current structure of the pension plan, employees retiring or taking voluntary retirement after 25 years of service will get pension to the tune of 50% of the average basic pay drawn in the last 12 months prior to superannuation.

 

Lowering the limit of voluntary service from 25 years to 20 years may also benefit surviving family members of pensioners, the official said. According to the current provisions, immediate family of the pensioner is eligible to get 60% of the last drawn pension before the demise of the subscriber. This clause also kicks in only after minimum qualifying service period of 25 years.

 

The official also said that the finance ministry may look at giving more tax incentives to the subscribers. The exact details are still being worked out, the official said.

 

In July, the government had said that the tax benefits available under the National Pension System will now apply to Unified Pension Scheme as well. The National Pension System has a host of tax incentives including tax deduction of up to INR 200,000 under section 80CCE and 80CCD(1B) of the Income Tax Act.

 

The government's push to incentivise the Unified Pension Scheme comes after muted response to the scheme that came into effect in April, following the demand for assured pension under the National Pension System. As on Jul. 20, only 31,555 employees have switched to Unified Pension Scheme out of the total 2.76 million subscribers under National Pension System. According to the official, the government may finalise an outreach programme this week to educate and sensitise more subscribers to switch to the plan.

 

The government introduced the defined-contribution National Pension System on Jan. 1, 2004, replacing the defined benefit pension scheme. All states, except Tamil Nadu and West Bengal, joined the new plan. Prior to that, under the Old Pension Scheme, government employees who have completed at least 10 years of service receive a monthly guaranteed pension based on their last drawn basic salary and the years of service. Under this, employees do not need to contribute.

 

Combining the National Pension System and Old Pension Scheme, the government had announced the Unified Pension Scheme last year after numerous rounds of discussions with stakeholders, including employee associations. The launch of the latest pension scheme also came at a time when the unpopularity of the National Pension System among government workers was snowballing into a political issue, with states like Chhattisgarh, Rajasthan, Punjab and Karnataka switching back to the Old Pension Scheme despite the higher fiscal costs.

 

Announcing the Unified Pension Scheme in August 2024, Cabinet Secretary T.V. Somanathan had said its fiscal cost will be around INR 70 billion in the first year, including past arrears.  End

 

Edited by Vandana Hingorani

 

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