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Central government employees have till September 30 to opt for the Unified Pension Scheme (UPS) under the National Pension System (NPS), which was approved by the Cabinet last August and came into effect from April 1 this year. As of Monday (September 15), only some 40,000 of the about 23.94 lakh employees under NPS had opted for UPS, according to sources in the Department of Pension and Pensioners’ Welfare.
The department on September 2 notified the Central Civil Services (Implementation of the Unified Pension Scheme under the National Pension System) Rules, 2025 to regulate service matters for central government employees opting for UPS.
Till the UPS was announced last year, central government employees hired before January 1, 2004, were under the Old Pension Scheme (OPS), which guarantees a fixed pension, while those employed after that were under the NPS, which is market-linked. While NPS subscribers and employee unions continue to demand a return to the OPS for all employees, the government last August announced the UPS.
While the NPS was mandatory for all central government employees joining from January 1, 2004, the UPS is optional. The scheme gives an assured payout of 50% of the average basic pay drawn by the employee in the last 12 months before retiring for a minimum service of 25 years. Upon the death of the pensioner, the spouse will be given an assured pension of up to 60% of the pension being drawn.
The first major difference is that the NPS was mandatory, while the UPS is optional. According to the rules notified by the department, employees who opt for the UPS till September 30 have a one-time option of going back to the NPS. They can exercise this option up to one year before superannuating or three months before opting for Voluntary Retirement Scheme (VRS). Once this choice is made, the employee cannot opt for the UPS again.
In a statement on Monday, the department said the option to switch “would provide more flexibility to subscribers in opting UPS and also provide them informed choice in planning their post-retirement financial security.”
Under NPS, the contribution to the pension account through the Permanent Retirement Account Number (PRAN) is 10% by employee and 14% by employer of the basic pay plus dearness allowance. For UPS, the PRAN contribution is 10% each for the employee and employer of the basic plus DA. There is an assured payout of 50% of the average basic pay of the last 12 months subject to completion of 25 years in service under UPS. The NPS does not have an assured amount; it is based on the accumulated corpus.
For this assured payout, the UPS has the provision of a pool corpus that would be formed through a contribution by the government of 8.5% of the basic pay plus DA. A minimum payout of Rs10,000 per month is guaranteed after 10 years of service under UPS. Employees being dismissed from service would not be eligible for the assured payout. The NPS does not have a lump sum payment, while UPS has one of 1/10th of the last basic pay plus DA for each completed six months of service.
Why is the UPS slow to take off?
Starting from April 1, the government had first given employees time till June 30 to opt for the UPS. The Finance Ministry extended the deadline to September 30 citing “representations” received from stakeholders.
The Department of Pension is working on creating awareness about the UPS. On September 9, the Secretary, V Srinivas, held a meeting with all ministries to spread information among eligible employees and help them make an informed choice. However, the number of employees opting for the new scheme remains low so far.
Speaking on condition of anonymity, some employees said their demand for OPS still stands and that the UPS does not offer the same benefits.
Under the OPS, there is no contribution from the employee and the government gives an assured pension of 50% of the last drawn basic pay plus DA. After the UPS was approved last year, the Central Secretariat Service Forum, which represents thousands of CSS employees, had said that both the UPS and NPS were not beneficial for employees and that it would continue to demand a return to the OPS for all.
