The Pension Fund Regulatory and Development Authority (PFRDA) has announced new regulations for the Unified Pension Scheme (UPS) on March 19.
Starting April 1, UPS subscribers will have the option to invest up to 50% of their retirement fund in equity. Additionally, subscribers will also have access to pension fund options.
Investment Options for UPS Subscribers
Under the new scheme, UPS subscribers will have the following investment options:
- 100% Investment in Government Securities (Scheme G)
- Life Cycle-Based Schemes:
A. Conservative Life Cycle Fund (LC-25): A maximum of 25% investment in equities.
B. Moderate Life Cycle Fund (LC-50): A maximum of 50% investment in equities.
Flexibility in Changing Pension Fund Options
The PFRDA notification also mentions that subscribers will be allowed to change their pension fund option once a year and modify their investment pattern twice a year.
UPS subscribers who choose a pension fund will be eligible for any surplus amount, but will also bear the responsibility for any shortfall, which may be compared to a benchmark corpus.
Surplus and Shortfall Calculation
The surplus amount will be calculated on the date of retirement or voluntary retirement (VRS), and will be paid to the subscriber after the UPS pay order is issued.
If there’s a shortfall, subscribers can fill the gap before retirement. If not filled, it may result in a lower payout at retirement.
The new UPS combines features of both the Old Pension Scheme and the National Pension System (NPS).
Government Contribution and Pension Guarantee
In the UPS, the government will contribute 18.5% of the employee’s basic salary, while the employee will contribute 10%.
For employees with at least 10 years of service, the government guarantees a minimum pension of ₹10,000 per month.
The pension will be calculated based on 50% of the employee’s basic salary, based on the average basic pay of the last 12 months before retirement.
This new scheme gives UPS subscribers more flexibility and options in managing their retirement savings.
