New Rules for Unified Pension Scheme (UPS): Government Clarifies Payouts and One-Time Switch

During a session in the Lok Sabha, Minister of State for Finance Pankaj Chaudhary provided a clear picture of how the Unified Pension Scheme (UPS) is being received. In response to questions from MP Shri Janardan Singh Sigriwal, the minister confirmed that 1,22,123 central government employees have chosen the Unified Pension Scheme (UPS) over the National Pension System (NPS). This group includes a mix of fresh recruits, currently serving staff, and even past retirees who were eligible for the transition. The data shows that the appeal of a guaranteed payout is driving many to move away from the market linked National Pension System (NPS).

Flexibility First: The One-Time One-Way Switch Facility

One of the most important aspects of this transition is the flexibility the government has introduced. To ensure that staff do not feel locked into a single choice, the government has provided a one-time, one-way switch facility. This allows those who have moved to the Unified Pension Scheme (UPS) to revert back to the National Pension System (NPS) if they feel it better suits their financial goals. However, this switch comes with specific timelines. For those nearing superannuation, the decision must be made at least 12 months before retirement. For those opting for voluntary retirement, the window is three months before the retirement date. This flexibility ensures that the Unified Pension Scheme (UPS) remains a choice rather than a mandate.

Deadlines and Extensions: How the Government Handled the Transition

The journey of the Unified Pension Scheme (UPS) began on April 1, 2025. Initially, the government set a deadline for June 30, 2025, for employees to make their choice between the National Pension System (NPS) and the new scheme. Recognizing the need for more deliberation, this deadline was extended first to September and finally to November 30, 2025. These extensions allowed a larger volume of central government employees to weigh the pros and cons of the Unified Pension Scheme (UPS) versus the National Pension System (NPS) before making a final commitment.

Assured Payouts: The Financial Security of UPS

The primary reason for the popularity of the Unified Pension Scheme (UPS) lies in its promise of financial stability. Unlike the National Pension System (NPS), which is subject to market fluctuations, the UPS guarantees 50% of the average basic pay from the last 12 months of service for those with at least 25 years of qualifying service. For those with 10 to 25 years of service, the Unified Pension Scheme (UPS) offers a proportionate payout, with a minimum guaranteed amount of ₹10,000 per month. This predictability is a significant upgrade for those who were previously reliant solely on the performance of the National Pension System (NPS) funds.

Clarifying the Family Pension Rules under UPS

There has been some curiosity regarding survivor benefits under the new rules. The government clarified that the Unified Pension Scheme (UPS) focuses on the spouse. In the event of an employee’s passing, the legally wedded spouse is entitled to 60% of the admissible pension. However, it was explicitly stated that children are not eligible for this 60% payout if the spouse is not alive. While the National Pension System (NPS) has its own set of withdrawal and annuity rules for nominees, the Unified Pension Scheme (UPS) maintains a more traditional family pension structure focused on the immediate life partner.

The introduction of the Unified Pension Scheme (UPS) marks a significant evolution in how the government handles employee welfare. By blending the contributory nature of the National Pension System (NPS) with the security of a defined benefit, the government aims to provide a safety net for its workforce. With over 1.22 lakh employees already on board, the Unified Pension Scheme (UPS) is set to become the primary vehicle for retirement security for central government employees in the years to come. Whether you prefer the market potential of the National Pension System (NPS) or the steady guarantee of the Unified Pension Scheme (UPS), the choice is now firmly in the hands of the employees.