Unified Pension Scheme to roll out from April 1. Here’s how it will benefit central govt employees

Central government employees, currently under National Pension System (NPS), will have the option to switch to Unified Pension Scheme, which incorporates features from both Old Pension Scheme (OPS) and NPS  

New Delhi: From April 1, Central government employees with at least 25 years of service will be eligible for a fixed pension equal to 50 per cent of their average basic salary from the last 12 months before retirement under the new Unified Pension Scheme (UPS).

The government is introducing the UPS to offer more financial security after retirement to at least 23 lakh Central government employees, particularly for those who prefer a stable and predictable income instead of a market-linked pension.

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Employees, who have served for more than 10 years but less than 25 years, will receive a minimum pension of Rs 10,000 per month. In case of the pensioner’s death, their family will be entitled to 60 per cent of the last pension drawn as a family pension.

Central government employees, currently under the National Pension System (NPS), will have the option to switch to the UPS.

The scheme is designed as a hybrid model, incorporating features from both the Old Pension Scheme (OPS) and the NPS. Unlike the NPS, which offers market-based returns without any fixed payout, the UPS ensures a guaranteed pension amount.

The OPS, which was replaced by the NPS in 2004, provided fully government-backed pensions with periodic dearness allowance revisions.

The introduction of the UPS comes in response to growing concerns among government employees about the uncertainties of the NPS. Several of them demanded a more predictable pension system to ensure financial stability after retirement.

The government aims to balance employee security with its fiscal responsibilities through this new scheme. This move may also influence State governments to explore similar pension models.

Those with over 25 years of service will benefit the most from the 50 per cent guaranteed pension, while others should consider their financial goals and risk tolerance. Employees seeking a steady post-retirement income may find the UPS more suitable, whereas those comfortable with market fluctuations may still prefer the NPS for potentially higher returns.

Three categories

Last week, the Pension Fund Regulatory and Development Authority (PFRDA) officially notified the operationalisation of the UPS under NPS Regulations 2025. These regulations enable the enrolment of three categories of Central government employees.

The first category covers existing Central government employees in service as on April 1, 2025, who are covered under the NPS, while the second category includes new recruits in the Central government services, who join service on or after April 1, 2025.

The third category includes Central government employees who were covered under the NPS and who have superannuated or voluntarily retired or have retired under Fundamental Rules 56(j) on or before March 31, 2025, and are eligible for the UPS or the legally wedded spouse in case of a subscriber who has superannuated or retired and has demised prior to exercising the option for the UPS.

The enrolment and claim forms for all these categories of Central government employees will be available online from April 1, 2025, on the website https://npscra.nsdl.co.in.