A New Pension Choice for Central Government Employees
The Ministry of Finance has introduced a significant, one-time opportunity for Central Government employees currently enrolled in the Unified Pension Scheme (UPS) to switch to the National Pension System (NPS). This option is available to eligible employees up to one year before their superannuation or three months before voluntary retirement, as per a new memorandum dated August 20, 2025.
What to Know Before You Switch
This decision is final and irreversible. Once you opt for NPS, you will no longer receive the assured payouts or other benefits guaranteed by the UPS.
At the time of your exit, the government’s 4% differential contribution will be added to your NPS corpus, following PFRDA guidelines. This move is designed to streamline pension benefits and offer more flexibility, while reinforcing NPS as a key retirement solution.
UPS vs. NPS: A Side-by-Side Comparison
Choosing between these two schemes means weighing guaranteed security against market-linked potential.
- Assured Payouts: UPS provides a fixed, guaranteed pension, typically 50% of your average basic salary for employees with at least 25 years of service. In contrast, your retirement income with NPS depends entirely on market performance, which carries investment risk.
- Inflation Protection: UPS pensions increase with DA revisions, which helps protect your buying power against inflation. NPS, while offering higher growth potential through market investments, does not have an automatic adjustment for inflation.
- Family Security: UPS offers a built-in family pension (typically 60% of the pension amount) to dependents after your death. NPS does not have this provision, which could leave families financially vulnerable.