The Other Side of UPS

 The Other Side of UPS

Bruhaspati Samal

General Secretary

Confederation of Central Govt. Employees and Workers

Odisha State Coordination Committee, Bhubaneswar

The Union Cabinet while approved a new pension system in the name of Unified Pension Scheme (UPS) on 24^th August 2024 had declared for Assured Pension, Assured Family Pension and Assured Minimum Pension. But the Official Gazette Notification issued in this regard on 25^th January 2025 has told about Assured Payout, Assured Family Payout and Assured Minimum Payout.

The term ‘Pension’ is missing under UPS. The retired employee may not be called as a pensioner since will not get any Pension, but Payout. The Govt. may define another term for the retired employees getting Payout. I think this is the beginning of a calculative process to end the pension system for the employees in toto by the Central Govt. Earlier; we have witnessed such hazardous consequences when the term ‘appointment’ was replaced with ‘engagement’ for some categories of employees.

2.    The Pension Committee as per the Terms of Reference was constituted for bringing improvements in NPS. Accordingly, Para-1 of the Gazette Notification has clarified that UPS is not a pension scheme but an option under National Pension System. That means, one already under NPS may or may not exercise his / her option for UPS.

3.    Para - 2 (i) (c) while describing the eligibility states that Assured Payout (50% of twelve monthly average basic pay immediately prior to superannuation) in cases of voluntary retirement after 25 years of qualifying service will commence from the date on which the employee would have superannuated, if he had continued in service. It clearly means that if an employee, who is supposed to serve, say for 35 years avails voluntary retirement just after completing 25 years, there will be no Payout for 10 years. What a welfare measure really it is! The family members including the retiree will have to starve and wait for 10 years for getting the retirement benefit which we now call Payout, not Pension.

4.    The lump sum payment on superannuation @10% of monthly emoluments for every completed six months of qualifying service is very meagre (Para – 2 (6) & Illustrative Example – B in the Annexure to the Notification.

5.     Para – 2 (x) while providing investment choices for the Individual Corpus (IC) alone states that in case of failure to exercise an investment choice, the ‘default pattern’ of investment regulated by PFRDA will apply which is confusing since not defined and thus will keep the employees in dark.  

6.     The investment decision from Pool Corpus (PC) which solely rests with the Central Govt. as per Para – 2 (xi) is quite arbitrary and fraught with risk.

7.     The existing beneficiaries under NPS and the future employees can exercise option either to go with NPS or to choose UPS once only during the entire service career (Para-3). Such option once exercised shall be final. Matters relating to policy concession, policy change, financial benefit etc. are forbidden in Para – 11 also. In the initial stage when the pros and cons of UPS is not known to any one, closing of reversal option is not at all a welfare measure.

8.     The computation of ‘Benchmark Corpus’ (BC) by PFRDA (Para – 5) may not be favourable for the employees opting for UPS in case of missing contributions both from the employee and employer since employees’ contribution is always taken care of by his DDO. The beneficiary may be forced to suffer for no fault of his own.

9.     Assured Payout is fully dependent on IC, PC and BC (Para – 8 & 9). Thus, there is no guarantee that a retiree under UPS will get the Assured Payout (50% of twelve monthly average basic pay immediately prior to superannuation) even if he retires with qualifying service of 25 years which has been made clear in Para – 10. The illustrative examples in the Annexure to the Notification clearly prove it.

10.  The proposed regulations to be issued by PFRDA may clear many things more.

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NB: These are my personal observations. Readers / Comrades are requested to guide me for any mistake committed by me, if any through the above analysis alongwith their opinions.