Unified Pension Scheme (UPS): In a significant move aimed at securing the post-retirement future of central government employees, the Centre has launched the Unified Pension Scheme (UPS), which officially came into effect on April 1, 2025.
The scheme provides an alternative to the existing National Pension System (NPS) and is designed to offer a guaranteed monthly pension with enhanced government contributions. While the new scheme is optional, employees should note that once they opt for UPS, returning to NPS will no longer be allowed — making this a one-time and irreversible decision.
What Is the Unified Pension Scheme (UPS)?
The Unified Pension Scheme is a government-backed pension model developed to provide more stable and predictable post-retirement income for central government employees. Unlike the market-linked NPS, which offers variable returns based on investments, UPS combines the benefits of a structured contribution plan with a guaranteed pension payout.
This scheme is available only to central employees who were in service under NPS as of April 1, 2025, and also to new joiners within a limited selection window. By aligning the best features of traditional pensions and investment-linked plans, UPS aims to balance security with accountability.
How Much Will Be Contributed Under UPS?
Under UPS, the employee contribution remains fixed at 10% of the basic salary plus dearness allowance — the same as in NPS. However, the government’s share increases significantly to 18.5%. Out of this, 10% will go directly into the employee’s PRAN (Permanent Retirement Account Number), while the remaining 8.5% will be placed into a common pooled corpus.
This pooled amount is managed centrally and is used to support the pension payments of all UPS participants. Although the 8.5% is not returned as a lump sum at maturity, it plays a crucial role in securing the long-term pension benefits under the scheme.
What Happens to Your Existing NPS Corpus?
Employees who choose to switch from NPS to UPS will have their existing NPS savings safely transferred to their current PRAN, which will then be linked with the Unified Pension Scheme. This ensures that the funds accumulated over the years remain intact, while the account transitions to reflect the terms and conditions of the UPS model.
From that point forward, all contributions and benefits will fall under the rules of UPS, including the guaranteed pension structure and pooled funding system. In this way, employees will not lose any of their past savings, and will instead see them integrated into the new pension system.
Who Is Eligible and How to Opt In?
The UPS is available to central government employees who were already enrolled in NPS as of April 1, 2025. These employees can voluntarily opt in to the new scheme any time before the deadline of June 30, 2025. Once opted in, the transition becomes permanent.
Additionally, newly recruited employees can also choose to join the UPS, but they must make that decision within 30 days of their joining date. The government has advised all eligible individuals to evaluate their financial goals and consult relevant authorities or financial planners before making a final decision.
UPS vs NPS Difference
| Feature | NPS | UPS |
|---|---|---|
| Employee Contribution | 10% of Basic + DA | 10% of Basic + DA |
| Government Contribution | 14% of Basic + DA | 18.5% (10% to PRAN + 8.5% to common pool) |
| Pension Nature | Market-linked, variable returns | Fixed pension, guaranteed by the government |
| Corpus Ownership | Fully owned by employee | PRAN-linked + pooled corpus for pension |
| Reversibility | Can remain or exit under NPS rules | Once opted, cannot revert to NPS |
| Risk Exposure | Subject to market performance | Low risk, government-backed |
| Withdrawal Flexibility | Partial withdrawals allowed | Subject to UPS pension norms |
The launch of the Unified Pension Scheme is being seen as a major step forward in India’s evolving pension framework. It addresses concerns over the unpredictability of NPS returns by introducing a more secure and centrally supported pension plan.
Employees with a lower risk appetite or those nearing retirement may find UPS particularly attractive, given its fixed monthly payout and enhanced government contribution. However, since the switch is permanent and time-bound, employees must carefully weigh the pros and cons before making a decision.
As the June 30 deadline approaches, government employees have a limited window to opt for a retirement plan that could bring both stability and peace of mind in the years to come.