Transforming India’s pension landscape in 2025 has some dramatic changes ahead, focusing on different improvements in financial security for the retirees. Some major changes include proposed increases in the Employees’ Pension Scheme (EPS) and, most importantly, the introduction of the Unified Pension Scheme (UPS) for central government employees.
It Underpins Proposed Hike in EPS Minimum Pension
The Parliamentary Standing Committee on Labour has recommended a significant increase in the minimum pension under the EPS administered by the Employees’ Provident Fund Organisation (EPFO). Since 2014, the minimum pension has been pegged at ₹1,000 per month, which the committee believes will prove an insufficient amount in view of increasing living costs. The Committee further recommended the amount be raised to ₹7,500 so that it would ensure pensioners live through a decent post-retirement life. This comes after a great deal of agitation from trade unions and pensioners’ associations. In addition, the Labour Ministry had also begun the first-ever third-party evaluation of EPS since its inception in 1995. The evaluation, which will complete by end-2025, is aimed at gauging the effectiveness and financial sustainability of the scheme.
Implementation Of The Unified Pension Scheme (UPS)
The launch of the Unified Pension Scheme (UPS) for central government employees would be effective as of April 1, 2025. The beloved pension will now provide a shore of up to 50% of the average basic salary drawn in the last 12 months before leaving the service to the employees, thereby addressing the concerns over unpredictability of returns under the National Pension System (NPS) .
Main Characteristics Of UPS
- Eligibility: Central government employees who joined NPS on or before April 1, 2025, and new recruits will be included thereafter.
- Contribution: Employees contribute 10% of basic pay and Dearness Allowance (DA) while the government matches that contribution. Furthermore, the government adds an additional 8.5% to a separate pool corpus to ensure the sustainability of the scheme.
- Investment Management: The contributions of employees can be opted for investment by the employees while the government solely manages the pool corpus ensuring stable returns.
- The Finance Ministry is studying international models of pension funds to come up with strong investment guidelines for the corpus pool, which will ensure long-term viability of UPS.
Peculiarities For Pensioners
These advancements reflect the government’s will to firmly establish a pension framework in India. The proposed hike in EPS pensions is aimed as an immediate relief measure for over 7.85 million pensioners, much of whom will presently receive the minimum monthly pension of ₹1,000.
At the same time, the UPS will provide a more predictable and assured retirement scheme to central government employees, thereby laying a precedent for such reforms under the future pension structure.
Stakeholders should keep an ear to the ground now for further announcements and timelines around implementation so as to get a full grasp of the benefits and requirements of these respective ivory-century reforms.
Also Read: EPFO New Rules 2025: Key Changes Every Employee Must Know