Unified Pension Scheme for central govt employees: Check out key conditions, application process

Central government employees currently in service who wish to shift to the newly launched Unified Pension Scheme (UPS) must fill out and submit Form A2, provided in the last section of the notification issued by the Pension Fund Regulatory and Development Authority (PFRDA). The application can be submitted either online or directly to the Drawing and Disbursing Officer (DDO).

However, newly joined employees should submit Form A1.

Key conditions
Separate PAN Number: UPS accounts will have a separate Permanent Account Number (PAN). Employees migrating from National Pension Scheme (NPS) to UPS will also receive a new PAN number. In addition to the primary pension account (Tier 1), a secondary investment account (Tier 2) will be available for personal investments.

60% withdrawal rule: Central government employees retiring under UPS will be allowed to withdraw up to 60% of their personal corpus fund. However, this withdrawal will result in a proportionate reduction in the monthly pension. For instance, an employee entitled to a monthly pension of Rs 20,000 who withdraws 60% of the corpus will receive only Rs. 8,000 per month, as 40% of the remaining amount will be paid out.

Partial withdrawals: Employees can make three partial withdrawals during their service period for specific needs such as purchasing a house, medical treatment and children’s education and marriage. To prevent a reduction in the monthly pension, the withdrawn amount can be repaid before retirement. Employees can withdraw up to 25% of their contributions (excluding profits) through this option.

Employees who have already made a partial withdrawal under NPS will be allowed only two more withdrawals under UPS. New employees will be eligible for partial withdrawals only after a three-year lock-in period.

Corpus fund: The personal corpus fund consists of 10% contribution from both the employee and the government, besides the profits earned from investments. In addition, the government’s 8.5% share is kept in a separate fund called the Pool Corpus. This amount cannot be withdrawn by employees, as it is used to ensure assured payouts after retirement.

Investment options: The amount in the personal corpus can be invested in shares, bonds, and debentures, with three available options. The first one stipulates 100% investment in government bonds while the second option permits up to 25% investment in shares. The third option allows the employees to invest up to 50% in shares.

Employees who prefer to avoid stock market risks can opt for the default option. Those who choose their own investment plans will be subject to market fluctuations, including both profits and losses.

Conditions at a glance

• Employee and government contributions: Employees contribute 10% of their wage (basic salary + DA), while the government contributes 18.5% monthly. Under NPS, the government’s contribution was only 14%.
• Assured pension: Pension will be guaranteed up to 50% of the average salary of the preceding 12 months. For full pension eligibility, employees must complete 25 years of service.
• Pro-rata pension calculation: Employees with service between 10 and 25 years will have their pension calculated proportionally using the same criteria.
• Minimum pension: Employees with at least 10 years of service will receive a minimum pension of Rs 10,000. Those with less than 10 years of service will not be eligible for a pension.
• Lump sum benefit: In addition to pension and gratuity, employees will receive a lump sum amount upon retirement. This will not affect their pension entitlement.