New pension norms in the works; finance ministry to meet state govts

Approved by the Union Cabinet on Saturday, the UPS kicks in from April 1, 2025

The Department of Expenditure (DoE) in the Ministry of Finance is likely to put out operational framework for implementing the unified pension scheme (UPS). This framework will outline the modalities for various scenarios, including individuals who retired under the National Pension System (NPS) and opted for partial withdrawals of the annuity amount.

Approved by the Union Cabinet on Saturday, UPS will be implemented from April 1, 2025.

“We will be releasing the operational framework. Technically, there is time until March 31, 2025, to finalise the operational modalities and mechanisms to be adopted by the Pension Fund Regulatory and Development Authority (PFRDA). Accordingly, the parameters and other details will be put in place,” a senior finance ministry official privy to the plan told Business Standard. Without disclosing specific timelines, he said that the framework would be made available as soon as possible.

In a week, DoE plans to begin meetings with representatives from state governments that have approached the finance ministry to understand the nuances of the new scheme.

The PFRDA has scheduled a press conference for Tuesday in New Delhi to provide insights into UPS.

Explaining the operational modalities, the finance ministry official observed that the intention is to include individuals who retired under NPS.

For instance, he said: “Some people may have retired three or four years ago; some may have withdrawn 50 per cent of the annuity amount, while others may not have withdrawn anything. There will be a mechanism for transferring the total corpus amount to the new unified scheme.”

This will involve a meticulous calculation of the years since retirement, contributions to the pension fund, the corresponding government contributions, and any money withdrawn from the overall NPS corpus at the time of retirement, among other factors.

Regarding the fiscal liability for states adopting UPS, the official said that each state government would need to conduct its analysis, as the pool and profile of employees vary from state to state.

“The numbers may differ, but around 2.3 million people are currently in NPS within the central government, which is the estimate we have at present,” the official said.

States will need to allocate funds in their next Budget if they wish to implement the scheme starting next year. The required amount will also depend on the number of NPS subscribers among their employees.

For individuals who opted for voluntary retirement, the full pension amount is typically provided after 25 years. “The framework will also address payouts if they retire before this 25-year cap. In such cases, the general principle could be applied,” he added.

According to current plans, pensions may not commence immediately but will start when the actual retirement date occurs, provided the person continues in government service.

Guidelines in the works
 

Expenditure dept working on guidelines to implement UPS 

Key parameters in different scenarios 

> To address operational issues of covering NPS retirees under the scheme

> For those who withdraw 50% of annuity amount, mechanism for transferring total corpus to UPS 

> In case of  VRS (before 25 years), pension may start from the date of superannuation