Switching from UPS to NPS? Govt clears one-time window with strict eligibility rules
Once the switch is exercised, employees will no longer be entitled to UPS benefits, including assured payouts. The government's 4% differential contribution will be added to the individual's NPS corpus at the time of exit, following PFRDA norms.
- Aug 25, 2025,
- Updated Aug 25, 2025 8:28 PM IST
The Ministry of Finance has introduced a one-time, one-way switch option for Central Government employees currently enrolled under the Unified Pension Scheme (UPS), allowing them to move to the National Pension System (NPS).
According to an official memorandum dated August 20, 2025, this facility is available to UPS subscribers up to one year before their superannuation or three months before voluntary retirement. Employees facing dismissal, removal, or disciplinary action will not be eligible.
Once the switch is exercised, employees will no longer be entitled to UPS benefits, including assured payouts. The government's 4% differential contribution will be added to the individual's NPS corpus at the time of exit, following PFRDA norms.
The memorandum directs all ministries and departments to inform eligible officials of this provision. This move aims to streamline pension benefits and provide flexibility while reinforcing NPS as a long-term retirement solution.
UPS vs NPS Unlike NPS, where retirement income depends on market performance and carries investment risk, UPS guarantees a fixed pension. Employees completing at least 25 years of service are entitled to 50% of their average basic salary from the last 12 months as pension.
A key difference lies in inflation protection. UPS pensions rise in tandem with DA revisions, shielding retirees from the eroding effects of inflation. NPS, despite its higher growth potential through market-linked investments in equities, bonds, and government securities, offers no automatic adjustment for inflation, posing long-term financial challenges.
Another critical factor is family security. UPS provides family pension benefits — typically 60% of the pension amount — to surviving dependents, ensuring continued financial support. NPS lacks such a built-in provision, which could leave families vulnerable in case of an untimely demise.
The Ministry of Finance has introduced a one-time, one-way switch option for Central Government employees currently enrolled under the Unified Pension Scheme (UPS), allowing them to move to the National Pension System (NPS).
According to an official memorandum dated August 20, 2025, this facility is available to UPS subscribers up to one year before their superannuation or three months before voluntary retirement. Employees facing dismissal, removal, or disciplinary action will not be eligible.
Once the switch is exercised, employees will no longer be entitled to UPS benefits, including assured payouts. The government's 4% differential contribution will be added to the individual's NPS corpus at the time of exit, following PFRDA norms.
The memorandum directs all ministries and departments to inform eligible officials of this provision. This move aims to streamline pension benefits and provide flexibility while reinforcing NPS as a long-term retirement solution.
UPS vs NPS Unlike NPS, where retirement income depends on market performance and carries investment risk, UPS guarantees a fixed pension. Employees completing at least 25 years of service are entitled to 50% of their average basic salary from the last 12 months as pension.
A key difference lies in inflation protection. UPS pensions rise in tandem with DA revisions, shielding retirees from the eroding effects of inflation. NPS, despite its higher growth potential through market-linked investments in equities, bonds, and government securities, offers no automatic adjustment for inflation, posing long-term financial challenges.
Another critical factor is family security. UPS provides family pension benefits — typically 60% of the pension amount — to surviving dependents, ensuring continued financial support. NPS lacks such a built-in provision, which could leave families vulnerable in case of an untimely demise.