Assured pension or market returns? NPS-UPS switch window shuts on September 30

Retirement solutions: The deadline for switching to the Unified Pension Scheme (UPS) is fast approaching, with the option remaining open until September 30, 2025. The scheme, introduced for central government employees on April 1, 2025, initially carried a switch-over deadline of June 30, 2025. However, owing to lukewarm participation and widespread hesitation among eligible employees, the government decided to extend the cut-off by three months.

Despite the extension, uptake has been slow. Data reveals that as of July 20, 2025, only 31,555 central government employees—roughly 1% of those eligible—had chosen to migrate to UPS. This lackluster response highlights the confusion and uncertainty surrounding the new system.

Confirming the revised deadline, the Ministry of Finance reiterated in a September 16 statement: “This option may be exercised on or before 30.09.2025, in alignment with the cut-off date already prescribed for other eligible categories under UPS.”

The UPS applies to central government employees who are enrolled under the National Pension System (NPS) and opt for UPS, which has been effective since January 1, 2004. Around 23 lakh government employees are eligible to choose between UPS and NPS. On August 24, 2024, the Union Cabinet, chaired by Prime Minister Narendra Modi, approved the UPS. Under the previous pension system, which concluded in January 2004, employees received 50% of their last drawn basic pay as pension.

Unified Pension Scheme

The Unified Pension Scheme (UPS) was officially notified by the government on January 24, 2025 through Notification No. F. No. FX-1/3/2024 PR. Positioned as an alternative within the National Pension System (NPS), UPS was designed to address long-standing concerns of central government staff about retirement stability.

From April 1, 2025, the government has introduced UPS as an option under the National Pension System (NPS) for central government employees. UPS will provide assured payouts to the employees.

While the NPS is largely market-driven, offering variable post-retirement returns, the UPS provides assured pension income, echoing features of the Old Pension Scheme (OPS). The hybrid framework ensures that employees opting into UPS enjoy the security of fixed post-retirement payouts while still retaining the flexibility to switch back to NPS later if desired.

Originally, all eligible employees, past retirees, and legally wedded spouses of deceased employees were given until June 30, 2025, to exercise their option. The subsequent extension until September 30, 2025, is seen as an effort to provide more time for informed decision-making.

UPS benefits

The government has issued additional clarifications to cover employees who joined service in the interim period but were already enrolled under NPS. These employees are now also eligible to exercise the switch to UPS, ensuring no one is left disadvantaged because of timing.

In June 2025, Union Minister Jitendra Singh confirmed that central government employees covered under UPS will now receive retirement and death gratuity benefits, bringing them on par with OPS beneficiaries. The Department of Pension and Pensioners’ Welfare (DoPPW) subsequently issued an order to formalize these provisions, including situations where an employee dies in service or is discharged due to invalidation or disability.

NPS to UPS switch

Although UPS promises stability, many employees remain cautious due to a lack of clarity about its long-term implications and comparisons with NPS returns. Financial planners point out that while UPS ensures guaranteed pension payouts, NPS—being market-linked—could potentially deliver higher earnings over time.

The muted response so far reflects this dilemma. By extending the deadline, the government hopes to give employees and retirees sufficient time to evaluate both options and choose a retirement plan aligned with their financial needs.

The deadline

The government has made it clear that September 30, 2025, will be the final deadline for opting into UPS. After this date, employees and retirees currently under NPS will no longer have the option to switch. The move underscores the government’s effort to provide greater choice and financial security to central government staff, while balancing the need for a uniform pension framework going forward.