Choosing between NPS and UPS: CA reveals the retirement dilemma no one tells the retirees
Central government employees now have until November 30, 2025, to decide whether to stay with the National Pension System (NPS) or shift to the Unified Pension Scheme (UPS). While the extension offers more time, experts say the real retirement dilemma goes far beyond just choosing a scheme.
- Oct 3, 2025,
- Updated Oct 3, 2025 5:26 PM IST
Central government employees have been given more time to decide between the National Pension System (NPS) and the newly introduced Unified Pension Scheme (UPS). The Finance Ministry on Tuesday extended the deadline for exercising the UPS option till November 30, 2025, marking the second extension since the scheme was launched. The UPS, effective from April 1, 2025, was initially open for switching till June 30. This was later pushed to September 30, and has now been extended once more, following requests from employees and stakeholders. The scheme is available to eligible serving employees, past retirees, and the legally wedded spouses of deceased retirees covered under NPS.
While the government has framed UPS as an additional option alongside NPS, employees are finding it difficult to make the choice.
The retirement puzzle
According to Chartered Accountant Nitin Kaushik, the debate isn’t really about NPS versus UPS. “The real question is: how will you run your household after 60, once the salary stops? Retirement isn’t about choosing a scheme, it’s about ensuring a steady income for decades,” he said.
Kaushik points to the root of the problem: lack of financial literacy, reliance on hearsay, and the tendency to look for shortcuts. He warns that WhatsApp forwards and casual advice often cloud such crucial life decisions.
The magic number
Planning retirement requires calculating the “magic number” — the corpus you need to live comfortably. For instance, a household spending ₹50,000 per month today could easily need double that in 12 years due to inflation. Using the 4% withdrawal rule, one can multiply annual expenses by 25 to estimate the required retirement fund.
Example: If you expect to need Rs 1 lakh per month (Rs 12 lakh annually), you’ll need around Rs 3 crore corpus to sustain retirement. If NPS investments are likely to give you Rs 1.5 crore, the shortfall must be filled through other investments.
NPS vs UPS: How they differ
NPS: Market-linked, flexible equity exposure (up to 75%), partial annuitisation required (40%), annuity returns of 6–8% typically. Higher growth potential but also market risk.
UPS: Provides a fixed lifetime pension, typically around 50% of last drawn pay, offering certainty and stability but less flexibility. Contributions are pooled with government support into a managed pension fund.
Kaushik suggests a broad guideline:
Younger employees (20–40 years) with willingness to invest and learn → NPS is more suitable.
Older employees (50+) who prefer stability and peace of mind → UPS provides security.
Beyond pension schemes
Experts emphasise that neither UPS nor NPS alone is sufficient to fight inflation. Employees are advised to:
Calculate their retirement corpus today.
Assess their NPS equity allocation.
Fill the income gap through systematic investments (SIPs), provident fund contributions, rental income, or other sources.
Avoid relying solely on pension, as rising costs can erode value over time.
A modern alternative
Both NPS and UPS are positioned as modern, transparent alternatives to the Old Pension Scheme (OPS). UPS provides defined benefits backed by government contributions, while NPS remains open to all citizens, offering market-based growth with regulatory oversight. Employees under UPS can also continue to invest in NPS separately for diversification.
Key takeaway
As Kaushik notes, “NPS vs UPS is just a tool choice. The real retirement hack is income-gap planning. Start early — because the cost of delay is always paid with your lifestyle later.”
With the new deadline of November 30, 2025, employees now have more time to weigh their options carefully and plan for a financially secure retirement.
Central government employees have been given more time to decide between the National Pension System (NPS) and the newly introduced Unified Pension Scheme (UPS). The Finance Ministry on Tuesday extended the deadline for exercising the UPS option till November 30, 2025, marking the second extension since the scheme was launched. The UPS, effective from April 1, 2025, was initially open for switching till June 30. This was later pushed to September 30, and has now been extended once more, following requests from employees and stakeholders. The scheme is available to eligible serving employees, past retirees, and the legally wedded spouses of deceased retirees covered under NPS.
While the government has framed UPS as an additional option alongside NPS, employees are finding it difficult to make the choice.
The retirement puzzle
According to Chartered Accountant Nitin Kaushik, the debate isn’t really about NPS versus UPS. “The real question is: how will you run your household after 60, once the salary stops? Retirement isn’t about choosing a scheme, it’s about ensuring a steady income for decades,” he said.
Kaushik points to the root of the problem: lack of financial literacy, reliance on hearsay, and the tendency to look for shortcuts. He warns that WhatsApp forwards and casual advice often cloud such crucial life decisions.
The magic number
Planning retirement requires calculating the “magic number” — the corpus you need to live comfortably. For instance, a household spending ₹50,000 per month today could easily need double that in 12 years due to inflation. Using the 4% withdrawal rule, one can multiply annual expenses by 25 to estimate the required retirement fund.
Example: If you expect to need Rs 1 lakh per month (Rs 12 lakh annually), you’ll need around Rs 3 crore corpus to sustain retirement. If NPS investments are likely to give you Rs 1.5 crore, the shortfall must be filled through other investments.
NPS vs UPS: How they differ
NPS: Market-linked, flexible equity exposure (up to 75%), partial annuitisation required (40%), annuity returns of 6–8% typically. Higher growth potential but also market risk.
UPS: Provides a fixed lifetime pension, typically around 50% of last drawn pay, offering certainty and stability but less flexibility. Contributions are pooled with government support into a managed pension fund.
Kaushik suggests a broad guideline:
Younger employees (20–40 years) with willingness to invest and learn → NPS is more suitable.
Older employees (50+) who prefer stability and peace of mind → UPS provides security.
Beyond pension schemes
Experts emphasise that neither UPS nor NPS alone is sufficient to fight inflation. Employees are advised to:
Calculate their retirement corpus today.
Assess their NPS equity allocation.
Fill the income gap through systematic investments (SIPs), provident fund contributions, rental income, or other sources.
Avoid relying solely on pension, as rising costs can erode value over time.
A modern alternative
Both NPS and UPS are positioned as modern, transparent alternatives to the Old Pension Scheme (OPS). UPS provides defined benefits backed by government contributions, while NPS remains open to all citizens, offering market-based growth with regulatory oversight. Employees under UPS can also continue to invest in NPS separately for diversification.
Key takeaway
As Kaushik notes, “NPS vs UPS is just a tool choice. The real retirement hack is income-gap planning. Start early — because the cost of delay is always paid with your lifestyle later.”
With the new deadline of November 30, 2025, employees now have more time to weigh their options carefully and plan for a financially secure retirement.