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Informist, Wednesday, Jun. 3, 2026

 

 

--PFRDA Source: 9 states notified Unified Pension Scheme for staff so far

--PFRDA Source: 9 states will implement Unified Pension Scheme hopefully soon

 

By Priyasmita Dutta and Sagar Sen

 

NEW DELHI – After extensive research and many rounds of discussions, nine states have notified the introduction of the Unified Pension Scheme for their staff, a senior official in the Pension Fund Regulatory and Development Authority said. These states are Uttarakhand, Odisha, Goa, Tripura, Haryana, Chhattisgarh, Arunachal Pradesh, Assam, and Maharashtra, the official told Informist.  

 

"The states are working out the modalities and are in the process of implementing it (the scheme), hopefully soon," the official said. These states have notified the scheme nearly two years after the Centre launched it in August 2024. All the above states, except Chhattisgarh, are currently covered under the National Pension Scheme. Chhattisgarh pulled out of NPS and switched back to the Old Pension Scheme in April 2022. 

 

The Centre introduced the defined-contribution NPS on Jan. 1, 2004, replacing the defined-benefit pension scheme, or the Old Pension Scheme. Under the Old Pension Scheme, government employees who complete at least 10 years of service receive a guaranteed monthly pension based on their last drawn basic salary and years of service. Under this scheme, employees are not required to contribute. The NPS, on the other hand, is a market-linked annuity scheme under which individuals contribute regularly during employment and receive a pension linked to the fund's performance upon retirement.

 

Under NPS, state government employees contribute 14% of their salary each month to the pension fund, and the state government makes a matching contribution. The system is administered and regulated by PFRDA. The National Pension System is mandatory for central government employees, while others may join voluntarily.

 

The government announced the Unified Pension Scheme in August 2024, combining features of the NPS and the Old Pension Scheme. The scheme was introduced at a time when opposition to the NPS was growing, with many then opposition-ruled states like Chhattisgarh, Rajasthan, Punjab, Himachal Pradesh, and Karnataka switching back to the Old Pension Scheme despite the higher fiscal costs.

 

The Unified Pension Scheme retains employee contributions but guarantees a pension equivalent to 50% of the average basic pay drawn in the final 12 months of service. The scheme guarantees a minimum pension of INR 10,000 per month for those with at least 10 years of service. The scheme also includes inflation indexation to preserve the real value of pension amounts. While PFRDA worked out the national architecture of the scheme, state governments can tweak the granular details like the quantum of fixed pension according to their social and fiscal policies. 

 

Maharashtra was the first state to show interest in joining the Unified Pension Scheme, almost immediately after the Centre announced it. However, the state had not notified it until recently. 

 

Chairman of the pension regulator S. Ramann had said last month that states are taking time to implement the Unified Pension Scheme as it requires extensive research and statistical modelling. "There is a guarantee involved. How to arrive at that guarantee amount?" he said, adding that it had taken the Centre one and a half years to work out the details. "You need to take the existing set of government employees, their entire demographic details, and then you run your simulation models to figure out the guarantee," he had told Informist. 

 

Once these states implement the Unified Pension Scheme, their fiscal outgo on pensions will go up, since it has defined benefits. Under it, employees contribute 10% of their basic pay and dearness allowance, while the government, or the states in this case, contribute another 18.5% to the pension pool. The corpus is then invested in government securities and equities, based on which the eventual pension payout is calculated. The fiscal burden of the Unified Pension Scheme is higher than that of the NPS since the governments have to ensure the defined pension benefit even if investment returns fall short.

 

The Old Pension Scheme is fiscally very expensive and has already created fiscal problems for states like Himachal Pradesh. A study by the Reserve Bank of India staff in 2023 had estimated that, in the long run, the shift to the Old Pension Scheme may increase the government's pension spending to more than 4.5 times the outgo under the NPS. The shift to the Unified Pension Scheme will not be that expensive. 

 

According to the PFRDA official, officials in the department are also engaged with other state governments to implement the Unified Pension Scheme.   End

 

Edited by Akul Nishant Akhoury

 

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