Outlook Business Desk
Central government employees can select the Unified Pension Scheme (UPS) under the National Pension System (NPS) until September 30, 2025. By September 15, approximately 40,000 out of an estimated 23.94 lakh eligible central government employees had chosen the UPS, as per the Department of Pension and Pensioners Welfare.
The Cabinet approved the Unified Pension Scheme in August 2024, and it came into effect on April 1, 2025. The Department of Pension and Pensioners Welfare has released rules to govern service-related matters for employees choosing the UPS under the NPS.
The Unified Pension Scheme provides central government employees with a guaranteed retirement pension. Staff appointed before January 1, 2004, were covered under the Old Pension Scheme (OPS), while those joining later were enrolled in the market-linked NPS. UPS is optional and ensures a pension of 50% of the average basic pay from the final 12 months after 25 years of service.
Under UPS, a pensioner’s spouse is entitled to 60% of the pension in case of death. The scheme guarantees a minimum monthly payout of ₹10,000 after 10 years of service and a lump sum of one-tenth of the last basic pay plus DA for every completed six months.
Unlike NPS, which is compulsory, UPS is optional for employees. Under NPS, contributions are 10% by the employee and 14% by the employer. For UPS, both employee and employer contribute 10%, with assured payouts, supported by a government pool corpus of 8.5% of basic pay plus DA.
Employees who choose UPS by September 30 have a one-time option to return to NPS, either before retirement or three months prior to voluntary retirement. Once this switch is made, they cannot rejoin UPS. This provision is designed to give employees more flexibility and better control over retirement planning.
UPS contributions are made through Permanent Retirement Account Number (PRAN), like NPS. Employees contribute 10% of basic pay plus DA, with the employer matching the amount. Unlike NPS, UPS offers a fixed payout instead of a market-linked corpus, ensuring a predictable and secure retirement income.
Despite the extended deadline, adoption of UPS has been slow. Many employees continue to favour the Old Pension Scheme, which provides 50% of the last drawn basic pay plus DA without requiring any personal contribution.
Employee unions, such as the Central Secretariat Service Forum, argue that both UPS and NPS are less advantageous than the Old Pension Scheme. Calls for a return to OPS continue, with employees emphasising the guaranteed benefits of the older scheme compared to the newer options.