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India greenlights pension scheme for federal government employees

The Narendra Modi government reassessed the current pension system, which was implemented after significant fiscal reforms in 2004.

The Unified Pension Scheme (UPS) will be introduced for over two million federal employees starting April 1, 2025. (Representational image: iStock)
The Unified Pension Scheme (UPS) will be introduced for over two million federal employees starting April 1, 2025. (Representational image: iStock)

THE INDIAN government has approved a pension scheme that will guarantee federal government employees 50 per cent of their base salary as a pension.

This marks a shift from the existing scheme, where payouts are tied to market returns.


The Narendra Modi government reassessed the current pension system, which was implemented after significant fiscal reforms in 2004.

This move follows some states' decisions to revert to the older system of fully funded guaranteed pensions, which puts a strain on public finances.

The Unified Pension Scheme (UPS) will be introduced for over two million federal employees starting April 1, 2025, according to Ashwini Vaishnaw, a cabinet minister.

He stated that the scheme would ensure 50 per cent of the base salary, as drawn during the last 12 months before retirement, as a pension for those who have served at least 25 years.

Currently, the National Pension Scheme (NPS) requires employees to contribute 10 per cent of their base salary, with the government adding 14 per cent. The pension amount is then based on the market returns from this investment, which is largely placed in federal debt.

Trade unions and opposition parties have pushed for a guaranteed minimum pension, making it a significant issue in the recent general elections.

The financial impact of the UPS on the government is expected to be about £565 million in the fiscal year 2024-25. The annual cost will vary based on the number of employees retiring each year, the minister said.

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