The Ministry of Finance is actively developing a robust investment framework for the Unified Pension Scheme (UPS), which is scheduled to be launched in April 2025. This new pension scheme is expected to benefit nearly 2.3 million central government employees by offering them an assured pension upon retirement.

To ensure long-term sustainability, the ministry is analyzing the functioning of global pension funds and drawing insights from the Employees’ Provident Fund Organisation (EPFO) in India. The focus is on identifying effective investment strategies that can deliver consistent returns while supporting the government's financial commitment to the assured pension model.

The UPS is designed with a dual-fund structure. The first component is the Individual Pension Fund, which will receive contributions from both employees and the government. Employees will contribute 10 percent of their basic pay and dearness allowance, which the government will match with an equal 10 percent contribution. Employees will have the freedom to choose the investment avenues for this portion of the fund.

The second component is a separate Pool Corpus, which will be entirely funded and managed by the government. An additional 8.5 percent of the employee’s basic pay and dearness allowance will be contributed by the government into this pool. The purpose of the Pool Corpus is to support the assured pension benefits, and its investment decisions will be centrally managed by the Ministry of Finance.

Implementing the UPS will place an estimated additional financial burden of ₹6,250 crore annually on the government. This increase stems from the government’s total contribution rising to 18.5 percent of an employee’s basic salary and dearness allowance. The employee’s contribution, however, will remain unchanged at 10 percent.

Under the new scheme, employees with a minimum of 25 years of service will receive an assured pension equal to 50 percent of their average basic pay in the final 12 months before retirement. Those with service periods between 10 and 25 years will be entitled to a proportionate pension based on their length of service. A minimum pension of ₹10,000 per month is guaranteed for all employees who have completed at least 10 years of service.

The scheme also includes a family pension provision, offering 60 percent of the assured pension amount to the spouse of a deceased pensioner. In addition, pension amounts will be adjusted periodically in accordance with the All India Consumer Price Index for Industrial Workers, ensuring protection against inflation. At retirement, beneficiaries will also receive a lump-sum payout, providing additional financial security.

By studying global pension models and the functioning of EPFO, the Finance Ministry aims to build a sustainable system capable of meeting future pension obligations. The Unified Pension Scheme marks a major transformation in India’s retirement policy, with a clear objective of delivering assured and inflation-protected pension benefits to government employees.