Pension options: How govt employees can subscribe to both UPS, NPS models for better pension benefits

Central government employees now have official confirmation that they may maintain accounts in both the Unified Pension Scheme (UPS) and the National Pension System (NPS). According to a clarification by the Pension Fund Regulatory and Development Authority (PFRDA), this dual participation is permitted if the NPS account is opened voluntarily under the All Citizen Model. This update follows the government's decision to extend the deadline for employees to opt into the UPS until 30 November 2025, aiming to provide enhanced pension benefits and broader investment options.

The PFRDA addressed a frequently asked question regarding dual scheme participation: "Yes, UPS Subscriber may, in addition to his UPS account, have additional account under NPS (Tier I and Tier II) on a voluntary basis under All Citizen model," the PFRDA portal states. This means employees who switch to the UPS can still access NPS benefits if they enrol under the citizen's scheme, increasing their choices.

The UPS, launched on 1 April 2025, is designed for central government employees appointed after 1 January 2004 who wish to transition from the NPS. It combines monthly employee and government contributions into a defined benefit pension fund. The pension amount under UPS is determined by the employee’s service, contributions, and age at retirement, with a focus on regulatory oversight and predictability.

In comparison, the NPS remains open to all Indian citizens. For government employees, the NPS is generally a mandatory scheme, with Tier-1 accounts offering a long-term, locked-in investment and retirement pension, and Tier-2 accounts providing flexible investment and withdrawal options. Government employees enrolled in UPS may also open and invest in both Tier-1 and Tier-2 NPS accounts, allowing for a diverse portfolio and expanded tax planning opportunities.

The government has made several changes to the UPS in response to limited uptake. Amendments include provisions for switching between schemes, updated rules regarding resignation and compulsory retirement, and enhanced tax exemptions. The extension of the deadline to 30 November 2025 has allowed more employees to consider whether to maintain NPS coverage or migrate to UPS, without foregoing the option of holding an NPS account voluntarily.

Clarifications regarding simultaneous participation in both schemes emerged after employee queries on social media and official forums. The PFRDA guidance confirms that employees enrolled in the UPS can open a voluntary NPS account under the All Citizen Model, but not through the standard government employee route. This approach preserves the integrity of both schemes while maximising financial flexibility for public sector staff.

The UPS is exclusive to government employees and offers a defined benefit structure with fixed monthly contributions from both employees and the government. In contrast, the NPS features market-linked returns and is open to all citizens, with government contributions guaranteed only under the UPS. The dual-scheme option allows employees to benefit from the stability of the UPS alongside the potential higher returns and flexibility offered by the NPS.

Central government employees have been advised that joining UPS does not preclude them from opening an NPS account under the All Citizen Model. This arrangement offers additional pension benefits and the opportunity for tailored investment planning, with employees able to leverage both Tier-1 and Tier-2 accounts for greater financial security and tax efficiency in the future.