Unified Pension Scheme (UPS) Under NPS: Complete Guide for Central Government Employees
The Unified Pension Scheme (UPS) under the National Pension System (NPS) represents a significant reform in pension benefits for Central Government employees. Effective October 29, 2025, the Department of Pension and Pensioners' Welfare has issued comprehensive guidelines through 10 Office Memorandums (OMs) covering various aspects of UPS implementation. This comprehensive guide covers all critical aspects of UPS that every central government employee should understand.
📑 Quick Navigation
- 1. Understanding the Unified Pension Scheme
- 2. Switch Option from UPS to NPS
- 3. Voluntary Retirement Benefits
- 4. Resignation and Exit Rules
- 5. Absorption in PSUs and Autonomous Bodies
- 6. Family Benefits on Death
- 7. Invalidation and Disablement Benefits
- 8. Penalty-Related Retirement
- 9. Dismissal and Removal Consequences
- 10. Departmental and Judicial Proceedings
Introduction to Unified Pension Scheme (UPS)
The Unified Pension Scheme has been notified through the Central Civil Services (Implementation of Unified Pension Scheme under the National Pension System) Rules, 2025 and the Central Civil Services (Payment of Gratuity under National Pension System) Rules, 2021. These rules govern service-related matters and gratuity payments for Central Government civil employees who have opted for UPS under NPS.
The UPS provides an assured payout component combined with the benefits of individual corpus accumulation, striking a balance between the security of defined benefits and the flexibility of defined contribution schemes.
Rule 11: One-Time, One-Way Switch Option from UPS to NPS
Understanding the Switch Facility
Central Government employees who opted for UPS have a one-time, one-way switch facility to revert to the National Pension System (NPS). This is a crucial option for employees who may want to change their pension regime.
Timing Restrictions for Switching
Employees can exercise the switch option at any time during their service, but not later than:
- Twelve months prior to the date of superannuation (retirement at 60 years)
- Three months prior to the deemed date of voluntary retirement
- At the time of resignation or compulsory retirement under Fundamental Rule 56(j) (non-penalty related)
When Switch Facility Cannot Be Used
⚠️ Important Restrictions
The switch facility cannot be exercised in the following circumstances:
- When departmental or judicial proceedings are pending or contemplated against the subscriber
- In cases of removal or dismissal from service
- In cases of compulsory retirement as a penalty
Benefits of Switching to NPS
When an employee switches from UPS to NPS:
- Government Contribution: The subscriber becomes eligible for 14% Central Government contribution (compared to the UPS default investment)
- Additional 4% Contribution: The additional 4% contribution for the period spent under UPS is computed on the default investment pattern and credited to the NPS account
- Future Contributions: Future government contributions (14%) are credited to the NPS account from the month following the switch
- Investment Choices: Subscribers can exercise investment choices for future contributions
- PFRDA Regulations: Standard PFRDA (Exits and Withdrawals under NPS) Regulations, 2015 apply
Important Consequence of Switching
Once switched to NPS, subscribers will no longer be eligible for the assured payout and other benefits under the Unified Pension Scheme. They will be governed by standard NPS exit and withdrawal regulations.
Rule 13: Voluntary Retirement Benefits
Who Can Opt for Voluntary Retirement
Any Central Government employee covered under UPS can apply for voluntary retirement after completing 20 years of regular service.
Process for Voluntary Retirement
- Notice Period: Employee must give at least 3 months' written notice to the appointing authority
- Authority Acceptance: The notice requires acceptance by the appointing authority
- Automatic Effectiveness: If the appointing authority does not refuse before the notice period expiry, retirement becomes effective automatically
- Notice Curtailment: Employees can request curtailment of the 3-month notice period if administrative convenience allows
Withdrawal of Voluntary Retirement Notice
An employee who has given notice cannot withdraw it except with specific approval of the appointing authority. Any withdrawal request must be made at least 15 days before the intended retirement date.
Voluntary Retirement Benefits Based on Qualifying Service
| Qualifying Service Completed | Pension Entitlement |
|---|---|
| Before 25 years | Pro-rata assured payout (proportional to service) |
| 25 years or more | Full assured payout as per PFRDA UPS regulations |
Rule 15: Resignation from Government Service
Consequences of Resignation
When a Central Government employee opts for UPS and then resigns, the following applies:
- Assured Payout Forfeited: Resignation entails forfeiture of the assured payout under UPS
- Lump Sum Payment: The accumulated pension wealth in the individual corpus is payable to the subscriber as a lump sum
- Waiting Period: Lump sum payment cannot be made before 90 days from the date the resignation becomes effective and the employee is relieved
Special Provision for Death During Notice Period
If the subscriber dies before the expiry of the 90-day period from the resignation effective date:
- The accumulated pension wealth is payable to the legally wedded spouse
- If no legally wedded spouse exists, the amount goes to the legal heir(s)
Rule 16: Absorption in Corporations, Companies, or Public Bodies
Deemed Retirement on Absorption
When a UPS subscriber is absorbed into a corporation, company, or body (autonomous or statutory) wholly or substantially owned/controlled by the Central or State Government, the subscriber is deemed to have retired from the date of absorption.
Benefits Based on Qualifying Service at Absorption
| Condition at Absorption | Entitlement |
|---|---|
| Less than 10 years qualifying service | Accumulated pension wealth paid as lump sum per PFRDA regulations |
| 10 years or more qualifying service | Entitled to assured payout as if superannuation |
Rule 17: Invalidation and Discharge Due to Infirmity
Eligibility for Invalidation Benefits
An employee opted for UPS can retire on invalidation if they suffer from bodily or mental infirmity that permanently incapacitates them for service.
Application Process
- Employee (or spouse/family member if employee is incapacitated) applies to the Head of Department
- Head of Office requests medical examination within 30 days of application receipt
- Medical authority examines subscriber to determine fitness for service
- A lady doctor must be included in the Medical Board when examining women candidates
Entitlements on Invalidation Discharge
- If availing Extraordinary Pension Rules benefits: Individual corpus closed, government contribution transferred to account, remaining amount paid as lump sum
- If availing UPS benefits: Benefits granted per PFRDA UPS regulations
- Death Gratuity: Additionally eligible per Rule 22 of Gratuity Rules 2021
Rule 18: Discharge Due to Disablement
Disablement Attributable to Government Service
Employees boarded out due to disablement attributable to government service receive:
- Extraordinary Pension Rules Path: Benefits per Central Civil Services (Extraordinary Pension) Rules; individual corpus closed, remaining corpus paid as lump sum
- UPS Path: Benefits per PFRDA UPS regulations
- Death Gratuity: Eligible for death gratuity per Gratuity Rules 2021
Rule 19: Family Benefits on Death of Employee
Death During Service
When a UPS subscriber dies while in service:
- If death is NOT attributable to Government service: Benefits per Central Civil Services (Pension) Rules, 2021
- If death IS attributable to Government service: Benefits per Central Civil Services (Extraordinary Pension) Rules, 2023
Death Gratuity Rates for Family
| Qualifying Service Length | Death Gratuity Rate |
|---|---|
| Less than 1 year | 2 times emoluments |
| 1 year to less than 5 years | 6 times emoluments |
| 5 years to less than 11 years | 12 times emoluments |
| 11 years to less than 20 years | 20 times emoluments |
| 20 years or more | Half of emoluments for each completed 6-month period (max: 33 times emoluments) |
Maximum death gratuity payable shall not exceed ₹25 lakhs.
Rule 20: Compulsory Retirement as Penalty
Impact on Assured Payout
When a UPS subscriber is compulsorily retired as a penalty:
- The competent authority can grant benefits at not less than 2/3 (67%) and not more than full (100%) of the admissible payout
- Benefits are paid per PFRDA UPS regulations
- For awards less than full benefits, the Union Public Service Commission must be consulted before the President passes the order
Rule 21: Dismissal or Removal from Service
Forfeiture of Assured Payout
When a UPS subscriber is dismissed or removed from Government service:
- Forfeiture: The employee forfeits all assured payouts from the individual corpus under UPS
- However: The accumulated pension wealth in individual corpus is still payable as lump sum
- Beneficiary: Paid to the subscriber, or if deceased, to the legally married spouse or legal heir(s)
Rule 22: Departmental or Judicial Proceedings Pending at Retirement
Scenario: Proceedings Pending at Superannuation
When departmental or judicial proceedings instituted during service remain pending at retirement:
- Lump Sum Payment: Employee gets accumulated pension wealth as lump sum per PFRDA UPS regulations
- No Assured Payout: No assured payout from individual corpus is paid
- Payment Timing: At superannuation retirement age
Full Exoneration Option
If the employee is fully exonerated from all charges:
- Employee can opt to avail assured payout under UPS based on notional corpus and benchmark corpus at retirement time
- Employee must deposit ≥40% of benchmark corpus (with interest) to avail this benefit
- Assured payout commences from original retirement date
- Arrears of assured payout with interest are paid
Key Highlights for UPS Subscribers
✅ Important Points to Remember
- Switch to NPS must be exercised within specified timelines before superannuation/retirement
- Assured payout is forfeited on resignation, dismissal, or removal
- Voluntary retirement requires 3 months' notice and 20 years of service
- Death gratuity varies significantly based on length of service
- Family receives individual corpus even if assured payout is forfeited
- Full exoneration from disciplinary proceedings can restore assured payout eligibility
- Absorption into PSUs/autonomous bodies is deemed retirement
- Invalidation requires medical examination and certification
Action Items for UPS Subscribers
📋 To-Do List
- Clarify your option under UPS (pension rules vs. UPS benefits path)
- Understand your current individual corpus accumulation
- If switching to NPS, plan timing carefully (before 12 months of superannuation)
- Track your qualifying service towards 25 years for full assured payout
- Ensure family members understand gratuity and death benefits
- Review your options if any disciplinary proceedings are pending
- Keep documentation of all service periods for benefit calculation
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