Unified Pension Scheme Explained: Check Draft Framework Eligibility, Assured Payout, Withdrawal

The Pension Fund Regulatory and Development Authority on Monday released the draft regulation framework for the Unified Pension Scheme. The 12-chapter draft regulation frameworks is open for stakeholder consultation and public comments till Feb. 17.

The document can be accessed at the PFRDA website in the 'Exposure Draft' section under 'Regulatory Framework' menu.

The framework addresses aspects like contribution, payouts, benefits and more. Here is a look at some key aspects for those interested in the scheme.

The framework specifies that existing employees as of March 31, 2025, already under the NPS are eligible for the scheme. New recruits from April 1, 2025, can opt for either UPS or NPS.

Retired employees before March 31, 2025 covered under NPS, and their spouses in case of deceased employees, can opt for UPS. Eligible employees must opt for UPS within a specified timeline. Once chosen, the decision cannot be changed.

Existing employees are to apply using Form A2 to switch to UPS. For new recruits from April 1, 2025, they are to apply immediately upon joining using Form A1.

As for retired employees or those superannuated before March 31, 2025, they must apply using Form B1 if they want to switch to UPS benefits. Deceased employee’s spouses can also apply for UPS, using Form B2.

The eligibility to receive benefits under the UPS are for employees with more than 10 years of qualifying service upon superannuation, and employees retired under Fundamental Rule. Also employees voluntarily retiring after more than 25 years of service with benefits from the date of what would have been their superannuation are also eligible.

Under the UPS, a lumpsum equivalent to one-tenth of last drawn basic pay and Dearness Allowance for every completed six months of service is applicable. This lumpsum payment is separate from the assured payout and does not affect it.

There is also a full assured payout of 50% of the average basic pay of the last 12 months. This is available if the subscriber has completed 25 years of qualifying service, contributed regularly, and the individual corpus meets the benchmark corpus.

The minimum guaranteed payout is Rs 10,000 per month if there is more that 10 years of qualifying service and the individual's corpus equals or exceeds the benchmark. There will be a proportionate reduction if there is less than 25 years of qualifying service or missing contributions.

Under the framework, subscribers can withdraw up to 60% of the individual corpus at retirement, which will reduce the assured payout proportionately.

Upon the subscriber’s death, the spouse receives 60% of the last paid assured payout for life, in addition to other vested benefits.

The dearness relief is applicable to both admissible payouts and family payouts, calculated the same way as the Dearness Allowance for serving employees.

The subscriber contributions should be 10% of basic pay and DA, or another percentage as specified by the government, credited to the subscriber's Permanent Retirement Account Number. The employer's contribution or the central government will match the subscriber’s contribution.

Contributions are deducted from the employee’s salary monthly. The central government adds an additional 8.5% of basic pay along with the DA for all employees enrolled in the UPS, to support the assured payout.

The pool corpus is managed by the Pension Fund and reviewed every three years to ensure sufficiency. Other contributions, such as transferred individual corpus upon superannuation, can be added to the pool corpus. The central government determines how the pool corpus is invested and manages the investment decisions. The pool corpus is to be audited annually by an appointed auditor.

Under UPS, subscribers can choose any registered pension fund and change it once a year. Subscribers can choose from government securities, life cycle funds, surplus or shortfall or statement updates. The specifications of these options are available in the document.

Subscribers can make partial withdrawals from their UPS corpus after a three-year lock-in period from the date of enrollment or NPS enrollment. Up to three withdrawals are allowed during the entire tenure under UPS.

Withdrawals are set to 25% of own contributions made by the subscriber, as of the withdrawal request. The allowed seasons for withdrawal include higher education for children, marriage expenses of children and purchase or construction of a residential house. Further, medical treatment for the subscriber or their family, disability or incapacitation related expenses along with skill development activities qualify as valid reasons. A family member can submit the request on behalf of the subscriber if the subscriber is ill.

UPS allows subscribers who are eligible for an assured payout to make a lumpsum withdrawal of up to 60% of their individual corpus at the time of superannuation, voluntary retirement, or retirement under specific rules. The withdrawal will reduce the assured payout proportionately.

There are separate payout procedures for all of the various options that are open for subscription.

Employees eligible under specific regulations must submit applications to the nodal office, which then issues the UPS Payout Order. If applicable, a monthly top-up amount will be paid to the retired employee to make up for any difference between the assured payout and the annuity based on the individual corpus.

The top-up amount will be calculated using the annuity rate applicable at the time and based on the individual corpus. Retired employees or their spouse must submit specific forms to the Head of Office for processing their claims, as per the prescribed timelines.