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According to the rules, called ‘Pension Fund Regulatory and Development Authority (Operationalisation of Unified Pension Scheme under National Pension System) Regulations, 2025’, the UPS will be available to only central government employees under the NPS as of now.
Under the Unified Pension Scheme, the assured payout will be calculated based on the last 12-month salary, months of qualified service, and retirement corpus.
Unified Pension Scheme: The Pension Fund Regulatory and Development Authority (PFRDA), which will manage the Unified Pension Scheme (UPS), has notified the operational regulations for the retirement scheme on March 19, 2025. These rules of the UPS, which was announced in August last year, will be implemented on April 1, 2025.
The government employees looking to opt for the unified pension scheme must apply within three months from April 1, 2025 (till June 30, 2025). However, newly recruited government employees joining on or after April 1 will have to take this decision within 30 days of their joining.
This new scheme, which combines aspects of both the Old Pension Scheme (OPS) and the National Pension System (NPS), aims to provide employees with a guaranteed pension, offering financial stability and dignity after retirement.
UPS Scheme Eligibility
According to the rules, called ‘Pension Fund Regulatory and Development Authority (Operationalisation of Unified Pension Scheme under National Pension System) Regulations, 2025’, the UPS will be available to only central government employees under the NPS as of now.
This includes employees already in service, newly recruited employees and those retired employees who were earlier under the NPS.
“The legally wedded spouse in case of a subscriber who has superannuated or retired and has demised prior to exercising the option for UPS” can also avail benefits under UPS.
Contribution & Fund Options
The monthly contribution of the UPS subscriber shall be 10 per cent of the basic pay (including non-practising allowance, where applicable) and dearness allowance thereon, which shall be credited to the individual PRAN of UPS Subscriber. The equal amount will be matched by the government.
According to the regulations, UPS subscribers will have the choice of default pattern of pension fund and default investment. They will have option to either go for a 100 per cent bond investments, or partial equity options (up to 50 per cent of their corpus) — Conservative Life Cycle Fund (with 25% equity exposure) and Moderate Life Cycle Fund (with 50% equity investment).
Also Read: UPS Subscribers Can Invest Up To 50% In Equity
Full PFRDA notification on UPS Regulations 2025 can be accessed here.
Can You Choose Or Switch Pension Fund?
Yes. “UPS Subscriber shall have an option to change the choice of pension fund once in a financial year and investment choice twice in a financial year,” according to the PFRDA notification.
UPS Subscriber shall have an option to choose the pension fund and the investment pattern including a default pattern in accordance with the guidelines issued by the Authority, for the investment of contributions made in the individual corpus under UPS, according to the regulations.
UPS subscribers not exercising such choice of pension fund shall be deemed to have opted for default pattern as determined by the Authority, the PFRDA said.
How To Join?
The eligible employees can join the unified pension scheme online or by physically submitting the forms to the concerned Drawing and Disbursing Officer (DDO). Form A2 is for existing employees, Form A1 for newly recruited employees, Form B2 for retired employees and Form B6 for the wife of the deceased pensioner.
Pension Management: Individual Vs Pool Corpus
The total pension corpus will be split between two funds: an individual pension fund and a separate pool corpus. The individual fund will comprise both employee and matching government contributions, while the pool corpus will only have additional government contributions.
The funds deposited in the Unified Pension Scheme (UPS) will be managed through two investment approaches. The first is the Individual Corpus, where employees can allocate their contributions to government securities (Scheme G) or opt for life cycle-based funds (LC-25, LC-50). The second is the Collective Corpus (Pool Corpus), which will be administered according to government regulations.
Upon retirement, if an employee’s fund accumulates a surplus, the excess amount will be returned to them. However, if the corpus falls short, either additional arrangements will be required to cover the deficit, or the pension amount may be adjusted accordingly.
The UPS brings an enhanced government contribution of 18.5 per cent, up from the earlier 14 per cent. However, employee contributions remain the same at 10 per cent of basic pay plus dearness allowance (DA).
UPS Benefits
Under the UPS, employees will be eligible for an assured payout under the following conditions:
Superannuation: Employees who retire after completing at least 10 years of qualifying service will receive an assured pension from the date of their retirement.
Retirement under FR 56(j): Employees retiring under government provisions, but without penalty, will also qualify for the assured payout starting from the date of their retirement.
Voluntary Retirement: Employees opting for voluntary retirement after 25 or more years of service will receive a payout starting from the date they would have reached superannuation, had they continued in service.
However, the Unified Pension Scheme will not apply to employees who are dismissed, removed, or resign from service. In such cases, they will not be eligible for the UPS.
Payout Calculation Under UPS
Under the Unified Pension Scheme, the assured payout will be calculated based on the last 12-month salary, months of qualified service, and retirement corpus. The UPS offers several tiers of payout based on years of service:
Full Assured Payout: Employees with 25 or more years of qualifying service will receive 50 percent of their average basic pay from the last 12 months of service.
Proportional Payout: Employees with less than 25 years of service will receive a proportional payout based on their qualifying service.
Minimum Guaranteed Payout: Employees with 10 or more years of service are assured a minimum payout of Rs. 10,000 per month.
Additionally, for employees opting for voluntary retirement after 25 years of service, the payout will begin from the date they would have reached the age of superannuation.
Withdrawal Rules Under UPS
The withdrawal rules under the unified pension scheme (UPS) is similar to the new pension scheme (NPS).
Full Withdrawal: On retirement, the retiree can withdraw up to 60% of his total corpus. But, this will affect his regular pension. If the employee dies, his duly married wife will get 60% of the last received pension for life. Apart from this, he will also be given a lump sum payment and other benefits.
Dearness Relief will be available only to those employees who have started receiving pension.
Partial Withdrawal: Under UPS, employees will be allowed partial withdrawal a maximum of 3 times after a lock-in period of 3 years. They can withdraw a maximum of 25% of their own deposit, but this will be possible only for certain needs. Such as children’s higher education or marriage, to buy or build a house (if there is no house already), expenses related to serious illness or disability, and for learning new skills or self-development.
If the employee is ill and is not in a position to apply himself, then a member of his family can apply for him. After partial withdrawal, employees can refill it if they want, so that their pension is not affected.