The term of the 7th Pay Commission ends on December 31, 2025.
New Delhi: The Unified Pension Scheme (UPS) combines features of New Pension System (NPS) and the Old Pension Scheme (OPS) which will be applicable from next year, with a requirement of 25 years of service for an employee to be eligible for a full pension.
Employees who retire in 2029 or later will qualify for a full pension since the UPS is available as an alternative to the NPS, introduced in 2004. Those retiring before completing 25 years of service will receive their pensions on a pro-rata basis. Nonetheless, the minimum pension is fixed at Rs 10,000 for individuals who have completed a minimum of 10 years of service.
How Will Be Pension Calculated Under UPS
The introduction of the 8th Pay Commission is anticipated in 2026, although this is currently speculative since the government has not yet announced its formation. The commission will offer recommendations for implementation subject to Cabinet approval. The term of the 7th Pay Commission is set to end on December 31, 2025.
If reports are to be believed, the 8th Pay Commission’s pay matrix is likely to be prepared using a fitment factor of 1.92. With this fitment factor, the current minimum salary for Level 1 under the 7th Pay Commission, which is Rs 18,000 with a grade pay of 1800, could be revised to Rs 34,560. The maximum salary for Level 18, the highest pay scale in the central government fixed for the position of cabinet secretary, is currently Rs 2.5 lakh. The pay scale hierarchy consists of 18 levels, with Level 18 being the top tier. Based on a fitment factor of 1.92, the maximum salary in the government sector may be revised to Rs 4.8 lakh under the 8th Pay Commission, reports FE.
What Will Be The Minimum And Maximum Pension Under Unified Pension Scheme?
Under the Unified Pension Scheme (UPS), the pension is determined at 50% of the average monthly salary during the 12 months before retirement. For instance, as full pension eligibility under the UPS requires 25 years of service, the initial group of pensioners qualifying for a full pension will retire in 2029, marking 25 years of service. This schedule coincides with the shift from the Old Pension Scheme (OPS) to the New Pension System (NPS) in January 2004, following the discontinuation of the OPS.
Should the 8th Pay Commission be enacted in January 2026, as anticipated by central government employees, the minimum wage is expected to be Rs 34,560, with the maximum reaching up to Rs 4.8 lakh. Additionally, employees are projected to benefit from five DA increments to their salaries before January 2029, coinciding with the retirement of the initial group of employees appointed in 2004. With a projected 4% hike at each interval, the DA is estimated to constitute 20% of the basic salary by that time.
For a salary of Rs 34,560, a 20% DA would add Rs 6,912, making the pension Rs 20,736, as it is calculated as 50% of the basic salary plus DA, for those in Level 1. Similarly, for a salary of Rs 4.8 lakh, with a DA of Rs 96,000, the pension for those in Level 18 would be Rs 2,88,000, which is 50% of their last drawn salary in January 2029.