8th CPC, DA Hikes and Pension Reforms: 10 Big Changes for Central Govt Employees in 2025

As 2025 comes to a close, Central Government employees and pensioners have seen several important policy changes that affected salaries, pensions, taxes and service delivery. Here’s a simple breakdown of the 10 key changes introduced in 2025.

8th Central Pay Commission gets clarity

The government officially set up the 8th Central Pay Commission (CPC) in late 2025. On December 2, 2025, the Finance Ministry clarified that pensions are included in its scope. The commission will review pay, allowances and pensions.

Dearness Allowance and Relief increased

Two DA/DR hikes were approved in 2025:

• 2% hike from January 1, 2025 (from 53% to 55%)
• 3% hike from July 1, 2025 (from 55% to 58%)

Unified Pension Scheme (UPS) launched

From April 1, 2025, the Unified Pension Scheme came into force. It offers an assured pension linked to average last drawn salary, with regular contributions from both employees and the government.

One-time switch from NPS to UPS

Employees who opted for NPS were allowed a one-time switch to UPS in 2025, subject to conditions. This gives employees more choice in retirement planning.

Digital Life Certificate made easier

Pensioners can now submit their Life Certificate using Aadhaar-based face authentication through a smartphone, no need to visit banks or offices.

Life certificate facility for pensioners abroad

Pensioners living outside India can now submit life certificates through simpler digital processes, without travelling back to India.

New rule for family pension

To receive a higher family pension, both parents must now submit life certificates. This change helps avoid excess pension payments.

More investment options under NPS and UPS

The government expanded Life Cycle and Balanced Life Cycle investment choices, allowing better control over retirement savings.

Higher equity exposure allowed

PFRDA introduced new options allowing up to 75% equity exposure, including Life Cycle 75 (High) and Aggressive options. Employees now have six investment choices.

New NPS exit rules

Government employees can stay invested in NPS up to the age of 85. At exit, at least 40% of savings must be used to buy an annuity, while the rest can be withdrawn fully or in phases.

Read More, Silver ETFs 2025 Recap: Multiple Funds Deliver Over 100% Returns; UTI Silver ETF, SBI Silver ETF FoF and More.

Conclusion

The year 2025 brought meaningful changes for Central Government employees and pensioners, from clarity on the 8th CPC and higher DA benefits to flexible pension and investment rules. These reforms aim to improve financial security, simplify processes, and help individuals plan better for retirement as India moves into 2026.

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