In a major announcement for central government employees, the Ministry of Finance has introduced a one-time, one-way switch facility from the Unified Pension Scheme (UPS) to the National Pension System (NPS).
According to the official memorandum dated August 25, 2025, employees currently enrolled in UPS can opt to shift to NPS before September 30, 2025. This move is aimed at streamlining pension benefits while giving employees greater flexibility for retirement planning.
Who Can Avail the Switch?
●All UPS subscribers are eligible, provided they are not facing dismissal, removal, or disciplinary action.
●The option can be exercised up to one year before superannuation or three months before voluntary retirement.
What Changes After Moving to NPS?
●Once employees switch to NPS, they will lose UPS benefits, including assured payouts.
●The government’s 4% differential contribution will be credited to the employee’s NPS corpus at exit, as per PFRDA norms.
●Retirement funds will then be managed under the market-linked structure of NPS, offering both risks and rewards.
Why This Matters
The Unified Pension Scheme (UPS) was introduced in April 2025 under the existing NPS architecture for central government employees. While UPS provided some security with fixed payouts, the NPS is designed as a long-term, flexible, and investment-driven retirement solution.
The government has directed all ministries and departments to inform eligible officials of this opportunity.
Key Deadlines
●Existing employees/retirees: Must exercise option by September 30, 2025.
●New recruits: Must decide within 30 days of joining.
With this decision, the Centre is signalling a push towards modern pension reforms, giving employees a choice to balance between assured security and market-linked growth.