Pension, Gratuity, and Allowances Get a Makeover: New Rules for Government Servants in 2025…

There are a number of significant changes which the Central Government has made in 2025 which directly affect the pension, retirement benefits, and allowances of government employees and pensioners. The purpose of these changes is to ensure that the system is faster, more fair, and more helpful to employees.

New Unified Pension Scheme (UPS).

• Since April 2025, the government introduced the Unified Pension Scheme that integrates characteristics of Old Pension Scheme (OPS) and National Pension System (NPS).
• Pension will be given to employees through 25 years of regular service at 50 percent of the basic salary of the last 12 months.
• Individuals who served over 10 years will receive a guaranteed minimum pension of 10,000 per month.
• This new plan offers more financial security to retirees than the previous NPS model.

Pension Activation on Retirement Day

All the departments have been advised to ensure that they prepare the pension files 12-15 months prior to the retirement date such that the pension commences on the day the retirement occurs.

The delays with regard to pension payments were common in the past, but this move will help to do away with such a problem.

Raise in Dearness Allowance (DA) and Relief.

The government re-increased Dearness Allowance (DA) and Dearness Relief (DR) in 2025 twice:

• January to June: 2% increase
• July to December: 3% increase

This has also seen the overall DA increase by 58 percent that provides millions of workers and pensioners with increased monthly earnings.

Salary Depending on Years of Service.

The uniform allowance was previously granted in a fixed amount as an annual allowance. It will now be computed proportionately in months of service.

When an employee retires mid year, he or she will be given the allowance on the months worked rather than losing the benefit.

Better Gratuity and Lump-Sum Payments.

The government has changed the regulations of the gratuity and lump-sum payments. 

Previously, NPS employees did not get both advantages, but now they do.