Monday, April 14, 2025

 Based on the March 2025 Gazette notification on the Unified Pension Scheme (UPS), here's a comparative report highlighting:

  1. Key insights not clearly visible in the notification but crucial

  2. Provisions that may be reconsidered or removed for employee benefit

  3. Policy suggestions to enhance the UPS


I. Key Insights (Beyond What the UPS Notification States)

FeatureOPSNPSUPS (as per Notification)Observation
Nature of PensionDefined Benefit (50% of last pay + DA)Market-linkedHybrid: Assured Payout + Benchmark Corpus-basedUPS tries balance but can result in lower benefits if corpus is less
Minimum Pension GuaranteeYesNoRs. 10,000/month after 10 yearsNot inflation-indexed; could be inadequate in future
Government ContributionFull liability14% (CG) + 10% (Employee)Equal match: 10% by Govt. & Employee + 8.5% in poolReduced employer responsibility vs OPS
Risk on Market VolatilityNoYesYes (for shortfall below benchmark corpus)Shortfall recovery burden on subscriber
Family PensionYes, lifelong to spouseAnnuity-based, limited60% of admissible payout (if conditions met)Not at par with OPS; no children/special needs provision
Partial WithdrawalNot applicableLimitedAllowed 3 times, for specific purposes onlyStill restrictive in genuine emergencies
DA BenefitYes, regularNoYes, but only on admissible payoutStarts only post-payout phase, no interim protection

II. Provisions in the UPS Notification that May Be Removed or Reconsidered

  1. Clause: Replenishment of Shortfall in Corpus

    • Concern: If individual corpus is lower than benchmark corpus, payout is reduced unless replenished by subscriber.

    • Suggestion: Remove burden from subscriber. Government should fund the gap from the pool corpus.

  2. Clause: Final Withdrawal Cap at 60%

    • Concern: This limits flexibility even if corpus is sufficient.

    • Suggestion: Allow up to 100% withdrawal if benchmark corpus is met or exceeded.

  3. Clause: Option Irrevocability

    • Concern: Once opted for UPS, employees cannot revert. No flexibility if terms prove disadvantageous.

    • Suggestion: Allow re-option within a cooling-off period (say 1 year) or after 5 years.

  4. Clause: Monthly Payout Based on “Average of Last 12 Months”

    • Concern: If employee’s pay is reduced due to leave/medical/suspension in last year, pension is adversely affected.

    • Suggestion: Take higher of 12-month average or last basic pay drawn.

  5. Clause: Family Pension Only to Spouse

    • Concern: Excludes dependent children, disabled dependents, parents.

    • Suggestion: Extend family payout provisions to dependent children or nominated dependents.


III. Suggestions to Improve UPS for Employee Welfare

  1. Link Minimum Guaranteed Pension with DA or CPI

    • A static Rs. 10,000/month could become negligible in future. Make it inflation-indexed.

  2. Hybrid Model with Tiered Security

    • Tier I: Minimum Government-guaranteed pension (e.g., Rs. 15,000)

    • Tier II: Market-based optional corpus to top-up pension

  3. Separate Medical Coverage or Integration with CGHS for Retirees

    • OPS retirees get CGHS benefits. Include similar guaranteed post-retirement health security under UPS.

  4. Allow Pension Commutation

    • Introduce optional commutation of pension (as in OPS) for urgent needs at retirement.

  5. Clarify Pool Corpus Utilization

    • Transparency and audit on pool corpus usage should be mandatory, ensuring it's used for employee support, not admin costs.

  6. Simplify Application and Withdrawal Process

    • Especially for family members/spouses after demise of UPS subscribers.

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