'Contribution Made On NPS Will Be Restored': What Happens After Employees Switch To UPS
The 14% government contribution made on NPS will be restored, along with the growth that was accumulated during the subscriber’s contribution, according to a PFRDA official.
The November 30 deadline for the transition from National Pension System (NPS) to the new Unified Pension System (UPS) is about to end, leaving participants to navigate switching into the new savings scheme.
Only those employees who have completed 10 years of service are eligible for a switch. As things stand, it is not compulsory for central government employees under NPS to opt for UPS.
The NPS framework aims to offer potentially higher, market-driven returns but introduces greater volatility compared to the steady accumulation under UPS.
The two pension schemes are also different based on the contributions made by the government. Under NPS, the government contributes 14% of the employee’s basic pay and dearness allowance.
Under UPS, the government contributes 18.5% of employee’s basic pay and DA. In both schemes, employees contribute 10% of their basic pay and DA.
What happens to your contributions after UPS switch
“The 14% government contribution made on NPS will be restored, along with the growth that was accumulated during the subscriber’s contribution to the scheme will be credited back to the UPS account. There will be no financial loss, if the subscribers choose to switch back to NPS from UPS,” said Sumeet Kaur Kapoor, Executive Director of Pension Fund Regulatory and Development Authority of India, in a recent interview posted by PFRDA on X.
"NPS has been giving a very good market return; however, the feedback from the ground was that there is no inflation indexation. Secondly, there is uncertainty and volatility in the market, making pension payout under NPS uncertain," said Kapoor. "So subscribers were not comfortable with it. In order to deal with these issues, the central government decided to come with UPS."
