UPS To Be Implemented From April 1: All Questions Answered

The Pension Fund Regulatory and Development Authority (PFRDA) has issued a gazette notification outlining the regulations for the Unified Pension Scheme (UPS). This scheme will be available from Apr. 1 for central government employees currently under the National Pension System (NPS).

The following categories of central government employees can opt for the UPS:

• Existing central government employees under NPS as of Apr. 1, 2025.

• Those joining central government services on or after Apr. 1, 2025 (must opt for UPS within 30 days of joining).

• Retired employees who were earlier under NPS and retired on or before Mar. 31, 2025, including those retiring under Fundamental Rules 56(j) without penalty.

• The legally wedded spouse of a retired employee who died before exercising the UPS option.

No. Employees choosing UPS must make their decision within three months from Apr. 1, 2025. Once exercised, the option is “final and irrevocable”.

Subscribers will contribute 10% of their basic pay (including non-practising allowance, if applicable) and dearness allowance, credited to their Permanent Retirement Account Number (PRAN). The central government will match this contribution. Additionally, the government will provide an extra contribution of around 8.5% of the basic pay plus dearness allowance to ensure assured payouts.

The scheme guarantees a minimum pension of Rs 10,000 per month, provided the subscriber has completed at least 10 years of qualifying service.

UPS subscribers can choose from pension funds registered with PFRDA. If no choice is made, the default investment pattern will be applied. Subscribers can change their pension fund selection once a year and their investment strategy twice a year.

A UPS subscriber who opts for a pension fund other than the default pattern can choose from the following investment options:

• Government Securities (Scheme G): Invest 100% of funds in government securities.

• Life Cycle-Based Schemes:

  • Conservative Life Cycle Fund (LC-25): Maximum equity exposure capped at 25%.

  • Moderate Life Cycle Fund (LC-50): Maximum equity exposure capped at 50%.

Yes, since UPS is a contributory scheme, any shortfall between the individual corpus and the benchmark corpus must be covered by the subscriber before retirement. If not, the payout will be proportionally reduced.

Subscribers or their legally wedded spouses may withdraw up to 60% of the lower value between the individual corpus and the benchmark corpus at the time of retirement.

As per the notification, “Provided that in case the individual corpus is more than the benchmark corpus as on the date of superannuation or voluntary retirement or retirement under Fundamental Rules 56(j) (which is not treated as penalty under Central Civil Services (Classification, Control and Appeal) Rules, 1965), as may be applicable, the final withdrawal amount shall be calculated on the benchmark Corpus and the excess amount in the individual corpus shall be credited to the designated bank account of the UPS Subscriber.”

Partial withdrawals of up to 25% of personal contributions are allowed after three years of enrolment in UPS or NPS, whichever is earlier. Withdrawals can be made only three times and are permitted for buying or constructing a house (if the subscriber does not already own one, apart from ancestral property).

Additionally, periods of foreign service or deputation for which no contributions have been made will not count towards the minimum 10-year qualifying service requirement.

The assured payout rate is 50% of the average basic pay over the 12 months preceding superannuation. This full payout applies after a minimum of 25 years of qualifying service. Those with fewer years will receive a proportionate amount.

Employees under NPS who choose UPS are eligible for assured payouts, provided they meet one of the following conditions:

• Completion of at least 10 years of qualifying service at superannuation.

• Retirement under FR 56(j), where it is not considered a penalty.

• Voluntary retirement after 25 years, with payouts beginning from the expected superannuation date.

Employees will not receive an assured payout if they:

• Retire with less than 10 years of qualifying service.

• Are dismissed or removed from service.

• Resign before completing the required service period.

As per reports, if the payout holder dies after superannuation, the legally wedded spouse — either at the time of superannuation, voluntary retirement or retirement under FR 56(j) — will receive a family payout amounting to 60% of the payout that was admissible to the holder before their death.