Unified Pension Scheme: Explaining Modi Govt’s politics behind the move in 5 points

Prime Minister Modi-led government August 24, announced the Unified Pension Scheme (UPS) for central government employees. 

The new scheme, which kicks in from the next fiscal year, assures a pension of 50 percent of the basic salary for those who joined the service after January 1, 2004.

U-turn charge

The Modi government says that UPS fulfils a long-pending demand from government employees. The announcement, however, triggered a political slugfest, with the Congress claiming that the ‘U’ in UPS stands for the Modi government's ‘U-turns.’ The BJP hit back at the opposition party, asking why it has not implemented the promised Old Pension Scheme (OPS) in states where it is in power.

Congress President Mallikarjun Kharge linked the latest 'U-turn' with the June 4 Lok Sabha Elections 2024 results, which saw the BJP reduced to 240 seats. The saffron party fell short of a simple majority of 272 seats, unlike the previous two terms, and thus had to rely on National Democratic Alliance (NDA) allies to form the government.

Assembly polls in mind

What is the political motive behind the announcement? The announcement comes in the run-up to assembly polls in key states of Maharashtra, Haryana, Jharkhand, Jammu&Kashmir and Haryana.

The Maharashtra cabinet on August 25 decided to implement for state government employees the UPS scheme announced by the Prime Minister Narendra Modi-led Union government a day earlier. By doing this, the NDA-ruled Maharashtra became the first state to adopt the new scheme.

Political analysts say that the move is to counter Congress's promise of a return to the Old Pension Scheme (OPS). The scheme perhaps helped the grand old party win Himachal Pradesh assembly polls in 2022.

However, it is another matter that the Congress failed to win Rajasthan, where it also promised to implement the OPS. The Congress did not mention OPS in its Lok Sabha Election 2024 manifesto.

90 lakh govt employees

At least 23 lakh central government employees stand to benefit from the UPS scheme across India. However, according to the Modi government, this number could potentially increase to 90 lakh if all the state governments choose to offer the scheme, extending its benefits to a broader range of government employees across India.

At least five Opposition-ruled states had moved their employees from NPS to OPS with a guaranteed pension at 50 percent of their salary.

The BJP has been averse to OPS because it would, it said, reverse the process of pension reforms with high costs to taxpayers. With the UPS for central government employees, the BJP has tried to address the core demands of employees with fewer demands on the exchequer, as the UPS is contributory as well, according to a Hindu report.

UPS ensures dignity of govt employees: Modi

PM Modi, who met with the unions representing government employees, said the move reflected his government's commitment to a secure future for government employees.

“We are proud of the hard work of all government employees who contribute significantly to national progress. The UPS ensures dignity and financial security for government employees, aligning with our commitment to their well-being and a secure future,” the PM said in a post on social media platform X.

'Dubious attempt to dupe employees'

The Centre of Indian Trade Unions (CITU) has demanded the restoration of the OPS. In a statement, CITU called the Modi government’s announcement of UPS a 'dubious' attempt to dupe employees. The UPS was based on the continuity of 10 percent contributions by the employees, with the Government contribution increased to 18.5 percent from the present 14 percent, it said.

"While in NPS, the subscriber can take 60 percent and has to invest 40 percent in an annuity and get a pension, under UPS, the entire pension wealth will have to be foregone to the government. In lieu of this, the government will give 10 percent of the employee emoluments, i.e., basic pay plus DA for every completed six months of service. For 25 years of completed service, the employee will get five months emoluments and for 10 years of service will get two months of pay on retirement as a benefit in addition to gratuity,” read the CITU statement.