The year 2025 has been significant for central government employees and pensioners.
Several key rules related to retirement, pensions, and allowances have been updated, directly impacting the finances and future of millions of employees.
The government has already increased the Dearness Allowance (DA) twice this year and introduced the new Unified Pension Scheme (UPS). Let’s look at the details.
Launch of the New Unified Pension Scheme (UPS)
In April 2025, the government introduced the Unified Pension Scheme (UPS), which merges the Old Pension Scheme and the National Pension System. Key features include:
Employees with 25 years of service will receive a pension of 50% of their last 12 months’ basic salary.
Employees with at least 10 years of service are guaranteed a minimum monthly pension of ₹10,000.
This new scheme ensures better financial security for government employees after retirement.
Pension Effective from Retirement Date
To make pension disbursement faster, all government departments have been instructed to prepare retirement files 12 to 15 months in advance.
This ensures that pensions are credited from the exact date of retirement, unlike before, when there were delays.
Increase in Dearness Allowance (DA) and Dearness Relief (DR)
To help employees cope with inflation, the government increased DA and DR twice in 2025:
2% increase between January and June
3% increase between July and December
Currently, the DA has reached 58%, which will significantly boost the monthly income of millions of employees and pensioners.
Uniform Allowance Now Based on Service Length
Earlier, the uniform allowance was a fixed yearly amount, regardless of retirement date.
Now, employees retiring mid-year will receive a prorated allowance, calculated according to the number of months served. This change ensures fair distribution of the allowance.
Improved Gratuity and Lump-Sum Benefits
The government has enhanced gratuity and lump-sum payment rules under the UPS scheme.
Employees can now receive both benefits together, providing stronger financial security at retirement.
Previously, National Pension System (NPS) employees did not have this advantage, but now they will benefit too.
