The Finance Ministry has extended the due date to exercise the option for the Unified Pension Scheme (UPS) by three months to September 30.
Earlier, eligible existing employees, past retirees, and the legally wedded spouses of deceased past retirees were given a period of three months i.e., up to June 30, to exercise their option under the scheme. Though no reason was given for the extension, it is believed that more time has been given considering the poor response received.
The scheme was made operational from April 1. According to the Government, the scheme is designed to have five major benefits: assured pension, assured family pension, assured minimum pension, inflation indexation, and lumpsum payment at superannuation, in addition to gratuity, all in one comprehensive package.
It is available to government servants who joined service on or after January 1, 2004, or who will be joining from now , with the facility for a one-time switch from NPS to UPS. It will also be available on an optional basis to State government employee.
Under UPS, while the government contribution will be raised to 18.5 per cent from 14 per cent, there will be no change in the employee contribution, which remains at 10 per cent of basic pay plus DA (Dearness Allowance). The entire pension corpus will be divided into two funds. The first, an individual pension fund to which the employee contribution and matching government contribution will be credited, will be invested as per the choice of investment made by the individual employee. The second will be a separate pool corpus, with the additional government contribution (8.5 per cent of basic and DA of all employees), and will be invested separately.
“UPS being a ‘fund-based’ system relies on the regular and timely accumulation and investment of applicable contributions (from both the employee and the employer) for assured payout to employees post-superannuation or retirement, as the case may be. The assurance of timely and regular payout of benefits under UPS would depend upon the adequacy of funds under the individual and pool corpus,” a notification issued in March, giving details of the rules, said.
For the individual corpus, the UPS subscriber will have the option to choose the pension fund and the investment pattern, including a default pattern. Other than that, a UPS subscriber can choose either Scheme G (invest 100 per cent in Government securities) or any of the two variants of Life Cycle-based schemes.
The first variant is the Conservative Life Cycle Fund, with maximum exposure to equity capped at 25 per cent, and the second variant is the Moderate Life Cycle Fund, with maximum exposure to equity capped at 50 per cent. “UPS subscriber will have the option to change the choice of pension fund once in a financial year, and investment choice twice in a financial year,” the notification said, while adding that the Pool Corpus will be allocated to such pension fund(s) as determined by the Central Government, which would invest the funds in accordance with the investment pattern and related aspects as approved by the Centre.