The Union Government, led by Prime Minister Narendra Modi, has announced the formation of the 8th Pay Commission ahead of the 2025 budget. This move will revise the salaries of all central government employees, including the armed forces, and update pension schemes for retirees. The Union Minister Ashwini Vaishnaw confirmed the formation of the commission on January 16, 2025, stating that its recommendations would take effect from January 1, 2026.
Currently, salaries and pensions are based on the 7th Pay Commission’s recommendations, implemented on January 1, 2016. Following the Centre’s announcement of the 8th Pay Commission, the attention of central government employees has turned to the Unified Pension Scheme (UPS).
The 8th Pay Commission is expected to bring significant changes to pensions under the National Pension System (NPS) and the Unified Pension Scheme (UPS). This scheme, set to launch on April 1, 2025, combines features of the Old Pension Scheme (OPS) and the New Pension Scheme (NPS), offering benefits like a family pension, a guaranteed pension amount, and a minimum pension for all central government employees.
The fitment factor is a multiplier used to calculate revised salaries and pensions. It accounts for inflation, employee needs, and the government’s affordability. Reports suggest the fitment factor could increase from 2.57 to 2.86, leading to higher salaries and pensions.
The Unified Pension Scheme (UPS) is a retirement plan designed to merge the best features of the Old Pension Scheme and the New Pension Scheme, offering government employees a comprehensive and secure post-retirement benefit.
It includes provisions such as a family pension, a guaranteed pension amount, and a minimum pension for all central government employees. The UPS is expected to be implemented starting April 1, 2025.
Under this scheme, the minimum pension will be Rs 10,000 per month, provided the employee has completed at least 10 years of service at the time of superannuation. In the event of a pensioner’s death, the family will receive 60% of the pension amount that the pensioner was receiving at the time of their demise.
With the implementation of a fitment factor of 2.86, the minimum basic salary for central government employees could see a substantial increase, rising from Rs 18,000 to Rs 51,480.
Similarly, pensions are expected to experience a significant hike, increasing from the current Rs 9,000 to a range between Rs 17,280 and Rs 25,740, depending on the finalized fitment factor.
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