Kolkata: UPS or NPS — Unified Pension Scheme or National Pension System — is a question that has bothered the Central government employees over the past few months. The Centre has said that it will allow a one-time and one-way switch from UPS to NPS even as many employees are weighing the comparative benefits of the two pension schemes. Whether migration will be allowed between the two was one of the key questions which were on the minds of the employees.
The Centre approved the UPS on August 24, 2024 and the scheme it was implemented for Central Government employees from April 1, 2025. However, there has been a less than lukewarm response to the UPS from the employees. As a result, the government has extended the deadline for switching from the NPS to the UPS till September 30 — by a period of three months.
The highlight of the UPS was tat it had the provision of a guaranteed pension, something the NPS lacked. The UPS was rolled out from April 1 this year. The deadline for employee to respond was three months — till June 30. But within that deadline, only about 1% of the central government employees indicated their choice for the UPS. The word went around that employees were hesitating to join the UPS since they were not sure whether the benefits outweighed the NPS and that once they migrated to UPS whether they would have the option to returning to the fold of the NPS.
What the Centre said on the switch
“This switch facility may be exercised by UPS optees any time not later than one year prior to the date of superannuation or three months prior to the deemed date of retirement in case of voluntary retirement, as applicable,” the department of financial services said in a memorandum on Monday, August 25. It also added, “lf switch facility not exercised as per aforesaid timelines, the employee shall continue under UPS by default.”
The government also said that once the switch is availed, the provisions of the Pension Fund Regulatory and Development Authority (Exit & Withdrawal under NPS) Regulations, 2015 would apply for the employee and he/she will no longer be eligible for assured payouts and UPS benefits. The government also said that the differential contribution (4%) at the default investment pattern will be calculated and credited to the individual’s NPS corpus at the time of exit.
UPS vs NPS: How do they compare
UPS rules state that the contribution from the employee will be 10% of basic pay + DA while the government’s contribution has been raised from 14% (applicable in case of NPS) to 18.5%.
UPS has the provision of assured pension of 50% of the last drawn salary of the employee. Last drawn salary refers to the average basic pay of last 12 months of service. The compensation will be linked to inflation. These will be applicable for all employees serving the government for a minimum period of 25 years. Another feature is that any employee who has completed 10 years of service will get a minimum pension of Rs 10,000.
Employees will get pension after attaining 60. Spouse of the pensioner will get pension at 60% of the last pension drawn after the death of the pensioner. The UPS paves the way for a risk-free pension since NPS returns are linked to the market.