The Centre is considering additional incentives to make the Unified Pension Scheme (UPS) more appealing to both new government recruits and current employees, The Financial Express reported.
Among the proposed changes is the possibility of treating pension income as ‘salary’ for the purposes of claiming the standard tax deduction, as well as extending pension benefits to dependent children.
Launched in response to growing demands from sections of government employees and opposition parties for a secure, fixed pension option, the UPS has so far received a lukewarm response.
Despite a three-month transition window from the market-linked National Pension System (NPS) that began on April 1, only around 30,000 individuals — roughly 1% of NPS subscribers — have opted into the guaranteed pension plan.
A senior government official told The Financial Express that the Centre is likely to offer pension benefits to dependent children, similar to the provisions under the now-defunct Old Pension Scheme (OPS).
The report also mentioned that pending tax benefits may soon be extended to UPS subscribers. Under OPS, pensions are considered salary income, allowing retirees to claim a standard deduction of ₹75,000. A similar tax advantage is expected to be introduced for UPS pensioners to enhance its attractiveness.
Additionally, the government may soon issue clarifications stating that employees who resign before completing 10 years of service can withdraw their own contributions to the pension corpus. However, such individuals would not be eligible for a monthly pension unless they complete a decade of service under UPS.
As it stands, the UPS guarantees a monthly pension equal to 50% of the employee’s last drawn salary (calculated as the average basic pay over the final 12 months of service) for those who retire after completing at least 25 years of service. This pension is fully inflation-adjusted.
Employees are eligible to begin receiving pension benefits at age 60. In the event of the pensioner’s death, their spouse is entitled to 60% of the pension amount. Moreover, all government staff who complete at least 10 years of service are assured a minimum monthly pension of Rs 10,000.
