Understanding Unified Pension Scheme for Central Government Employees | The PFRDA Podcast

Hello and welcome to today's special episode of our podcast, where we sit down with officers of PFRDA, India's pension regulator, and decode important financial decisions for central government employees. I'm your host Shreya. Today we are focusing on a topic that's been generating a lot of buzz, Unified Pension Scheme or UPS, a topic that sparked a lot of discussion and curiosity.

Since its introduction, many employees are wondering, should I stay with NPS or is UPS the better choice for me? To help us decode this, joining us today are two key voices from the Pension Fund Regulatory and Development Authority, Ms. Sumit Kaur, Executive Director at PFRDA and Mr. Guneet Singh Anand, Assistant Manager at PFRDA.

Welcome to the show.

Thank you so much Shreya. Happy to be here. Let's start with our first segment. What's UPS and what's new in UPS since April 2025? NPS was introduced mandatorily for central government employees since January 2004 and since been running successfully.

Then what was the need for the government to launch UPS, Ms. Kapoor? Absolutely very important question and a very basic question. So both NPS and UPS are the schemes that are run by the central government and NPS was giving a very good market return. However, the feedback from the ground was that there is no inflation indexation. Secondly, there is a market uncertainty. So because of the volatility in the market, the pension payouts are uncertain.

The subscribers were not comfortable with this. So in order to deal with these two issues, the central government decided to come out with UPS. Now, when to come out with UPS. Now when they came out with UPS they added some features to NPS so I love to call it NPS plus so it's NPS plus plus then there is a central government assurance to it and what do they assure?

They assure four major things. One first you get 50% of your last basic pay that's 12 months average of your last basic pay and then you also get dearness relief on that thirdly the family the spouse the legally wedded spouse gets 60% of the last short payout to the subscriber over and above all this there is one extra thing that has been added that is one time lump sum and that one time lump sum is one tenth of your last basic pay and this is for six months of your salary so if you

worked for 20 years you get four months of your salary so these are added benefits that have been added so NPS plus plus central government assurance.

So UPS has been in the spotlight since its launch in April 2025 and the government has made several amendments and issued clarifications to make the scheme more appealing. Ms Kapoor would you walk us through those key changes?

Absolutely. So, the government has been very sensitive to the needs and clarifications required by the subscriber so that the subscriber is able to make informed choices.

So, they have come out with a lot of things in the last few months. subscriber so that the subscriber is able to make informed choices.

So they have come out with lot of things in last few months. The first important thing is the government has allowed one way one time switch from UPS to NPS. Secondly they have clarified that you get the gratuity as you were getting in NPS you will get the same gratuity. Thirdly the tax benefits that are there on NPS,

the same tax benefits apply to UPS also. Another important thing is the VRS. Initially, UPS said that you needed 25 years of qualifying service to get VRS, but now that has been reduced to 20 years, although the payout would be proportionate. So a lot of changes that has been brought out.

Thank you, Ms. Kapoor, that was quite insightful. So moving on to our next segment, switching from UPS to NPS. Along with the features of UPS, there is also a special provision, a one-time, one-way switch option available to subscribers. Ms. Kapoor, could you explain what exactly happens when a UPS subscriber chooses to switch over to NPS?

Yes, so as I said, the government has brought in that flexibility where the subscriber can move from UPS to NPS till the age of 59 years of age. So whenever the subscriber decides to switch back to NPS, number one, the 14% contribution is restored. That means the person will start getting 14% of co-contribution

from the government. Number 2, during the period when that person was in UPS, he got only 10% of the co-contribution. So the differential 4% of co-contribution is credited into the NPS account. Besides the growth that happened on that 4% co-contribution that is also credited back. The person now no longer is under the UPS framework so the assured benefits will not accrue to that person however you will be regulated by the NPS exit regulations. Again for clarity I ask that while in UPS I will get only plus 10% in

my plan when I switch back to NPS will I suffer a loss of 4% government contribution? Absolutely, the government has ensured that there is no financial loss whatsoever to the subscriber if He or she switches back to NPS. So abundant clarity I would like to say that 4% contribution that was accruing during the period the person was in UPS entire amount will be credited to his or her brand, number 2 whatever growth the market growth was there during this period would also be credited so the person will

get the benefit of whatever compounding or whatever you call it the returns will accrue back in his NPS account. Thank you ma'am. Guneet, could you tell us how many years of service a subscriber must complete to become

eligible for UPS benefits?

Yes, Shreya. So basically, if a subscriber has completed a minimum 10 years of qualifying service and

he is superannoting after that, so then he will be eligible to get all the UPS benefits. Thank you I think that was quite insightful. So moving on to our next segment now is UPS as flexible as NPS? Ms. Kapoor if an NPS subscriber opts for UPS will he lose all his accumulated corpus in NPS pran? No what happens is this is simply a method of migrating from NPS to UPS so the person was having an NPS pran that simply gets re-tagged to UPS pran the pran number remains the same and whatever accumulated corpus was there in his NPS pran that gets transferred to the

UPS pran so he will not lose the accumulated corpus. In case of NPS subscribers who have retired before 31st March 2025, if they make a claim for UPS, will they have to return back the lump sum withdrawal or surrender the annuity? Not at all. So, any person who has retired before 31st March 2025 and was an NPS subscriber, they have already availed the benefits of NPS they do not have to return back the cash or the lump sum withdrawal that they took

they do not have to return back the annuity but if they apply what they will get is one time lump sum they will get the monthly top up amount they will get the DR on that and the family also becomes eligible to the 60% of payout besides that they will get the DR on that and the family also becomes eligible to the 60% of payout. Besides that they will also get areas, not only areas, there will be interest on areas that they will get. So I think it's a win-win situation for the past retirees, they will only benefit from it so they must apply for it before 30th September.

That sounds like a well thought out transition process. Now Guneet, one common belief is that UPS is less flexible than NPS. Is that accurate?

No Shreya, actually this belief is factually wrong. Because UPS is offering as many flexibilities that NPS offers. Like you have the choice to choose amongst the pension fund manager, you have the choice to choose from the investment pattern with maximum equity going up to 50%. And you have the choice of partial withdrawal as that was available in NPS. And you also have the choice of getting a final withdrawal. That is you can withdraw 60% of your corpus at the time of retirement. So that flexibility

is also there. And as the ma'am said one time switch facility has been provided to UPS subscribers. So if any day he decides that you know NPS is giving me better pension so he can switch towards NPS. So that facility is also being provided.

Thank you so much for the insights Guneet. Moving on to our next segment that focuses on voluntary retirement. Ms Kapoor, what benefits are available under UPS if a subscriber decides to take voluntary retirement? So, a person can take voluntary retirement after 20 years of service, although the full assured payout will accrue only after 25 years of the qualifying service.

Now, as soon as the person takes VRS that person can withdraw 60% of the corpus as final withdrawal the person will also get one time lump sum that is one tenth of the salary for every six months that he has worked besides the short payout will begin at the age of 60 or the deem date of superannuation. However, the person is also eligible to opt for one time switch back to NPS. So that facility is also available. And what if I want to switch to NPS if I plan to take VRS?

Yeah, absolutely. That facility is available. So the person if he decides to take VRS, three months before the VRS, that person can switch back to NPS if he wants to.

So as I understand that in VRS, the payout shall start from the deemed date of superannuation. However, in case of the subscriber has taken VRS with deferred assured payout and dies before commencement of payout

and other benefits, what are the benefits available to the spouse? Absolutely, the spouse is well taken care of. The government has come out with the clarification saying that in case of unfortunate demise of a subscriber between the time period he took the VRS and the payout, the short payout started the spouse becomes eligible for 60% of the assured payout immediately on the death of the subscriber.

So the spouse is well taken care of. Taking this forward to our next segment, cases of resignation, removal or dismissal from service and compulsory retirement. What happens in case of removal or dismissal from service, Guneet?

So basically, if a subscriber is being removed or dismissed from service, then they will be getting their entire accumulated corpus as a one-time payment in their bank account.

And Guneet, what happens in case of resignation from service?

Yes, then also the treatment is same. But in case of resignation, a subscriber always has an option to switch back to NPS. That one-time switch facility is available. So if he exercises that facility then he will be switched back to NPS or if he doesn't exercise that facility then he will be eligible to get the individual corpus

as a one time payment in their bank account. Great. Ms. Kapoor, what happens in case of compulsory retirement as a penalty? So in case there is a compulsory retirement which is as a penalty in that particular case also the subscriber is you know is able to get the assured payout the only thing is it might be reduced in accordance with the penalty that is levied by the competent authority. So the competent authority is able to you know they can order the deduction up to one third of the assured payout.

So the minimum the subscriber would get is two third of the assured payout or of the admissible payout and the maximum is the admissible payout. So that depends upon the penalty levying authority. Thank you ma'am and moving on to our next segment now UPS versus NPS. Guneet we know

NPS allows 60% corporate withdrawal at retirement. What about UPS vs NPS Guneet, we know NPS allows 60% corpus withdrawal at retirement. What about UPS?

Yes, so UPS is also allowing you to withdraw up to 60% of your corpus at the time of retirement. So, any day when you retire, you can withdraw this 60% amount and that facility has been provided in UPS also.

Great. Our next segment is Reduced for early retirement or partial withdrawals. Ms. Kapoor, one concern we hear often is that the 50% assured pension in UPS reduces if the subscriber has less than 25 years of service or makes partial withdrawal.

How does that work?

So, we are all aware that UPS and NPS both are number one employee linked schemes, number two they are also related to the funds that are you know put in the scheme. That means it's a funded scheme. It depends upon the contributions received. So either if you have lesser years of service or you withdraw, whether it's partial withdrawal or final withdrawal, naturally the corpus would come down and in both NPS and UPS the benefits would reduce so it's the same in both the

cases however there is a redeeming feature in case of UPS you can always put back the money so if you put back the money your corpus increases and you can always get back the 50% a short the payouts so you can always do that. I think that's quite flexible. So our next segment benefits in case of death of the subscriber. Now a sensitive but important question. What

happens in case of death during service, Guneet? Yes Shreya, that is a very important question. In case a subscriber dies while in service, then the OPS pension, that is old pension scheme benefits are available to his family. So for this, what he will have to do, while applying for UPS, he will have to also give a Form 1 wherein he gives the consent for the OPS in case of death. So this Form 1 I am talking about has been provided in the UPS rules, so that using this Form 1, he can take the OPS benefits.

So as earlier mentioned where the minimum pension of rupees 10,000 is guaranteed to

spouse under UPS. Basically whatever the pension subscriber was getting, whatever the payout subscriber was getting, the spouse of that subscriber shall be eligible to get 60% of that amount. So whatever the amount was available to subscriber, 60% of that will be paid to spouse.

Okay. And is Gratuity also available under UPS, Ms. Kapoor? Absolutely. Gratuity is available as was available in case of NPS. And this is over and above the one-time lump sum that is being given by the government. And our next segment is how to apply for UPS. How can a central government

employee apply for UPS, Guneet? Basically a new joinee they can apply using form A1 that has been provided. This can be done either through online mode by going logging into the CRA website or through physical mode by submitting the physical application form to their nodal office and for the employees who are already in service and those who wish to migrate for to UPS they can do it by using form A2 again this is also available online as well as in the physical mode. If an NPS

subscriber has retired can he or she also get the benefit? Yes, they are also entitled to get the UPS benefit. Suppose a subscriber has retired before 31st March 2025, so then they can apply for the added UPS benefit by using Form B2. And in case the subscriber is not there, then his or her spouse, they can apply using Form B4 or B6. This again, this application forms are available in the online mode also

and also in the physical mode. So for the online mode, they can log into the CRA website and they can apply through there. And for physical mode, they will have to give us physical form to their nodal office, DDO, PO or head of office. And then they will be able to opt for this.

And what about the spouses of deceased subscribers?

As I said, the spouses of the deceased subscriber, they can apply using form V4 and V6.

Moving on to my next question, how can those central government employees whose brand have not generated yet they can apply for UPS? Yeah, so there could be some central government employees who have just joined and their brands have not been generated. So these subscribers should also fill up the form, they can fill up the A1 form and give

it physically to the nodal office in case they are not able to apply online. They must do it before 30th of September. So wherever if they are in the training agency they can give it to the training agency or training academy or they can give it to the nodal office or they can give it to their carder controlling authority so they must submit the form before thirtieth of September. So our last and final segment where we will talk about the final thoughts UPS versus NPS so the big question what is better UPS or NPS I would like miss Kapoor to start with so

it's a million dollar question actually so I think there is no one size fits all solution to it and that solution I don't think will occur today because you know UPS and NPS is dependent upon lots of parameters and these parameters might change over the period of person's service so closer to retirement you would be clear about lot of things you know what your family situation is you know what your health situation is you know what returns the market has already delivered so lot of clarity comes to you when you know what returns the market has already delivered.

So lot of clarity comes to you when you are closer to the retirement. So I think the best decision, the informed decision would be taken closer to the retirement and for that if you want to decide at that point of time please keep your options open and the only way you can keep your options open is act and submit the UPS migration form by 30th September because if you don't then you stay in NPS and the only option you have is NPS so please keep your options open that is my sincere advice you can always go back

to NPS there is one time one switch facility and the decision will be taken best before retirement at 59 years of age till then you can decide any time. Even if you take VRS, even if you resign, you can always go back to NPS. So keep your options open. I think that would be the prudent thing to do.

I think that's a very flexible option given to the central government employees. So Guneet for you, since you are a young professional,

what are your thoughts on UPS for the young central government employees?

Yes, as ma'am said, you know, it's always good to have both the eggs in the basket. So, at a later date, you can decide which one is better for you. So, it is prudent that, you know, one mig migrate to UPS right now and you know at a later date when they are closer to their retirement they can decide which option is best so it's always good to have both the options at your disposal. So I have one

last question for you Mr. Guneet. Is there any website or calculator where I

can see which scheme is better for me? Yes so basically you know there are a lot of calculators going around in the market but what I would suggest is the official calculator that has been provided in the NPS Trust website. So you can visit that calculator, you can you know feed in some parameters like your date of joining, current salary and everything and you can easily calculate you know which what kind of returns you will be getting in both the, which what kind of returns will you be getting in

both the schemes, what kind of benefits you will be getting in both the schemes. So nptrust.org.in that is the website. So you can visit and you can check the benefits.

Thank you so much, Ms. Kapoor and Mr. Anand for breaking this down in such a clear and balanced way. To our listeners, I remember a very famous quote which explains power of choice very nicely stating that one option is the path to our power, with choice comes control. So do your research and act before the 30th September deadline to make the most informed

decision. decision.

Thank you.