Unified Pension Scheme from April 1: Are You Eligible For 50% guaranteed pension?

The Pension Fund Regulatory and Development Authority (PFRDA) has introduced new regulations for implementing the Unified Pension Scheme (UPS) under the National Pension System (NPS). These rules, titled “Pension Fund Regulatory and Development Authority (Operationalisation of Unified Pension Scheme under National Pension System) Regulations, 2025,” were officially notified on March 19, 2025, and will come into effect from April 1, 2025.

These regulations outline the framework, procedures, and responsibilities for UPS implementation. The scheme will be optional for central government employees who are already part of the NPS, including:

• Existing employees
• Newly recruited employees
• Retired employees who were previously under the NPS
• Legally married wives of deceased pensioners (if the retiree had opted for NPS but did not opt for UPS)

Let’s break down the key highlights, eligibility, and benefits of the Unified Pension Scheme.

What is the Unified Pension Scheme (UPS)?

UPS is a pension scheme designed for central government employees who are already under the NPS. The scheme aims to provide long-term financial security to employees and their families.

Key Features:

• Optional for NPS-covered employees
• One-time selection (Once opted, it cannot be changed)
• Covers retired employees and their spouses
• Government contribution included
• Investment-based pension model

Who Can Opt for UPS?

The following individuals are eligible for UPS:

Eligible Group	Criteria
Existing Employees	Already under NPS
Newly Recruited Employees	Must decide within 30 days of joining
Retired Employees	Previously covered under NPS
Spouse of Deceased Pensioner	Legally married wife can claim UPS benefits if the retiree was in NPS

How and When to Apply for UPS?

Employees who wish to switch to UPS must apply within the specified time frame:

• Existing employees: Within 3 months from April 1, 2025
• New recruits: Within 30 days of joining
• The government may extend deadlines if necessary

Application Process:

• Online: Through the CRA portal
• Offline: Via Head of Office or DDO
• Required Forms:
  • Form A1: Newly recruited employees
  • Form A2: Existing employees
  • Form B2: Retired employees
  • Form B6: Spouses of deceased pensioners

Important: If an eligible employee does not apply within the deadline, they will remain in NPS and cannot switch to UPS later.

Employee and Government Contributions in UPS

Contribution Type	Percentage of Basic Salary + DA
Employee’s Contribution	10%
Government’s Contribution	10%
Additional Government Contribution to Pool Corpus	8.5%

Note: The additional 8.5% goes into a Pool Corpus that helps sustain the pension fund.

Investment and Fund Management in UPS

UPS funds are managed through two types of investment mechanisms:

1. Individual Corpus – Employees can invest in:
   • Government Securities (Scheme G)
   • Life Cycle-based Funds (LC-25, LC-50)
2. Collective Corpus (Pool Corpus) – Managed as per government rules.

• If the employee’s fund grows beyond expectations, they receive the excess amount at retirement.
• If the fund underperforms, additional funds may be required, or pension payouts may be adjusted.

Pension and Other Benefits Under UPS

To receive a pension under UPS, an employee must have completed at least 10 years of service.

• Voluntary Retirement (VRS) – Employees who retire after 25 years of service can receive a pension.
• Compulsory Retirement (FR 56(j)) – Employees forcibly retired (except for disciplinary action) will still receive UPS benefits.

Upon retirement, employees will receive:

• Lump Sum Amount (Determined by service tenure and last salary)
• Regular Monthly Pension

How Pension is Calculated?

The pension is based on the formula:

Withdrawal of Funds & Family Pension

Situation	Withdrawal Allowed
Employee retires	Can withdraw up to 60% of the corpus (affects monthly pension)
Employee dies	The spouse receives 60% of last pension amount as a lifetime benefit
Dearness Relief (DR)	Available only after pension disbursal begins

Partial Withdrawal Facility

Employees can partially withdraw funds up to 3 times after a lock-in period of 3 years.

Allowed Uses for Partial Withdrawal:

• Higher education or marriage of children
• Purchase/construction of a house (if no house is owned)
• Medical expenses due to serious illness/disability
• Skill development and self-improvement

If an employee is unwell and unable to apply, their family member can submit the withdrawal request on their behalf.

Frequently Asked Questions (FAQs)

1. Can I switch back to NPS after opting for UPS?

No, once you opt for UPS, you cannot switch back to NPS. The decision is permanent.

2. What happens if I don’t apply for UPS within the deadline?

You will remain in NPS and will not be eligible for UPS benefits in the future.

3. Can a retired employee’s wife get UPS benefits?

Yes, if a retiree under NPS dies without opting for UPS, their legally married wife can apply for UPS benefits.

4. Will my pension be affected if I withdraw 60% of my corpus at retirement?

Yes, withdrawing a larger portion of the corpus at retirement will reduce the monthly pension amount.

Conclusion

The Unified Pension Scheme (UPS) under NPS is a significant policy shift aimed at providing financial security and a structured pension for government employees. While it offers multiple benefits, employees must make a careful and informed decision since the switch is irreversible. With government contributions, investment-based growth, and family pension benefits, UPS is structured to offer long-term stability for retirees and their dependents.

Click here to learn more