Government Notifies One-Time Switch from UPS to NPS for Central Employees

The Ministry of Finance under the Government of India notified on January 24, 2025, for Central Government employees covered under the National Pension System (NPS).

The Ministry of Finance stated that, It has been decided that a one-time, one-way switch facility from UPS to NPS will be made available to all Central Government employees who have selected the Unified Pension Scheme.

NPS refers to the National Pension System. It involves systematic savings in a choice of investments such as stocks and bonds managed by regulated pension funds, and it offers tax benefits and a pension corpus for retirement. However, the Unified Pension Scheme (UPS) This scheme was introduced as an option under NPS; it is a government–backed pension plan for Central Government employees in India. It aims to provide a more predictable and stable income stream after retirement with a guaranteed minimum pension.

This switch facility will be implemented 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. Related provisions will be made for resignation and cases of Rule 56J, with minor modifications as necessary. The employee will continue under the Unified Pension Scheme (UPS) by default if the switch facility is not exercised as per the above-mentioned timelines.

The switch facility will not be permitted in case of removal or compulsory retirement as a penalty or for cases where disciplinary proceedings are ongoing or inspected.

And once the switch facility is availed, the provisions of the Pension Fund Regulatory and Development Authority (PFDRA) Exit and Withdrawal under NPS Regulations, 2015, will apply. The concerned employees shall cease to be eligible for assured payouts and Unified Pension Scheme (UPS) benefits.

The government’s differential contribution of 4% at the default investment pattern will be worked out and will be credited to the individual’s NPS corpus at the time of exit.