The Unified Pension Scheme (UPS) is an important update for Central Government employees under the National Pension System (NPS) who are seeking retirement stability. Effective from 1 April 2025, this scheme is designed to provide a guaranteed monthly pension, financial security for your family, and a lump sum benefit upon retirement.
In this blog, we will explain everything you need to know about the Unified Pension Scheme 2025, including eligibility, benefits, contributions, fund structure, and how it affects your existing NPS account-all in clear and simple way for general readers and government employees.
Let’s get started.
What is the Unified Pension Scheme (UPS)?
The Unified Pension Scheme (UPS) is a new optional scheme introduced by the Ministry of Finance. It offers an Assured Monthly Pension and a lump sum retirement benefit to those Central Government employees who are part of the National Pension System (NPS) and who opt into this scheme.
This scheme has been announced through a Gazette Notification (F. No. FX-1/3/2024-PR) dated 24 January 2025, which partially modifies previous pension-related notifications.
Why Was the Unified Pension Scheme Introduced?
The National Pension System (NPS), though contributory, does not offer guaranteed returns. With UPS, the Government wants to provide employees:
- Financial security after retirement
- Assured payout even in uncertain markets
- Support for families after the employee’s death
This scheme combines the discipline of NPS with the certainty of a fixed pension, ensuring peace of mind for government servants.
Who Can Opt for the Unified Pension Scheme?
The scheme is only available to Central Government employees who are:
- Already covered under NPS
- In active service or already retired (with conditions)
- Willing to opt into the UPS
Choosing this scheme is completely voluntary, but once you opt in, you cannot reverse your decision.
Eligibility Conditions for Assured Pension (Assured Payout)
To receive a monthly pension under the UPS, you must meet one of the following conditions:
- Superannuation: An assured payout is available if an employee superannuates after completing a qualifying service of ten years or more.
- Government Retirement (FR 56(j)): If the Government retires an employee under the provisions of FR 56(j) (which is not a penalty), the assured payout starts from the date of such retirement.
- Voluntary Retirement: In the case of voluntary retirement after a minimum qualifying service of 25 years, the assured payout begins from the date the employee would have superannuated if their service had continued.
You will not get the assured payout if you:
- Resign from the job
- Are removed or dismissed from service due to disciplinary action
Key Benefits Under the Unified Pension Scheme
Here are the important benefits you will receive under the Unified Pension Scheme:
1. Monthly Assured Pension (Assured Payout)
- Full Assured Pension = If you have completed at least 25 years of service, you will get 50% of your average basic salary over the last 12 months before retirement as a fixed monthly pension.
- Proportional Pension = If the qualifying service period is less than 25 years, a proportionate payout will be admissible.
- Minimum Guarantee Payout = If you have 10 or more years of qualifying service at retirement, you are guaranteed a minimum pension of ₹10,000/month.
- Voluntary Retirement Payout: For voluntary retirement after 25 years, pension starts from the date you would have normally retired (superannuation date).
2. Family Pension
- If you die after retirement, your legally wedded spouse will receive 60% of your pension amount.
- The spouse must have been legally married to you at the time of retirement/voluntary retirement/retirement under FR 56(j).
3. Dearness Relief (DR)
- Dearness Relief will be provided on both the assured payout and family payout. This relief will be calculated in the same way as Dearness Allowance for serving employees.
- DR will start only when your pension starts.
4. Lump Sum Payment on Superannuation
Under the Unified Pension Scheme (UPS), a one-time lump sum amount is paid at the time of superannuation, voluntary retirement (VR), or retirement under FR 56(j), if the employee has completed at least 10 years of qualifying service.
This payment is calculated at 10% of monthly emoluments (which includes basic pay plus Dearness Allowance) for every completed six months of qualifying service. This lump sum payment is an additional benefit and will not affect the quantum of the assured payout i.e. this amount is extra and does not affect your monthly pension.
Lump Sum Calculation Example:
Assumptions for Calculation:
| Basic pay as on the date of superannuation or VR or retirement under FR 56(j) | Rs. 45,000 |
| Dearness Allowance thereon @ 53% | Rs. 23,850 |
| Total emoluments | Rs. 68,850 |
Lump sum amount = (1/10 × 68,850) × L = 6,885 × L
Where L = Number of six-monthly completed years of service based on the number of months of contribution to individual’s pension corpus.
Amount of Lump Sum, depending upon the length of qualifying service:
| 1/10 of emoluments (Rs) | Length of qualifying service (number of months of contribution) L | Number of completed 6 months | Amount of Lump sum (Rs) |
| 6,885 | 10 years (120 months) | 20 | 1,37,700 |
| 6,885 | 15 years (180 months) | 30 | 2,06,550 |
| 6,885 | 20 years (240 months) | 40 | 2,75,400 |
| 6,885 | 25 years (300 months) | 50 | 3,44,250 |
| 6,885 | 30 years (360 months) | 60 | 4,13,100 |
| 6,885 | 35 years (420 months) | 70 | 4,81,950 |
Note: No lump sum will be payable if the service length is less than 10 years (less than 120 months of contribution), as Unified Pension Scheme is not applicable in such a case.
Structure of Pension Funds Under UPS
Two types of funds are created under this scheme:
1. Individual Corpus
- Employee Contribution: 10% of (Basic + DA)
- Government Matching Contribution: 10% of (Basic + DA)
- Both amounts are added to your personal pension account.
2. Pool Corpus
- The Central Government will give an extra payment, estimated at 8.5% of your basic pay + Dearness Allowance, for all employees who pick the Unified Pension Scheme option. This extra money goes into a shared pool corpus (a big common fund). This additional contribution is specifically to help make sure you get your assured payouts from the Unified Pension Scheme option.
Investment Choices:
- Individual Corpus: Employees can exercise investment choices for their individual corpus. These choices are regulated by the Pension Fund Regulatory and Development Authority (PFRDA). If you don’t choose, it will be managed as per the default pattern set by the PFRDA (Pension Fund Regulatory and Development Authority).
- Pool corpus investment decisions are made only by the Government.
What Happens When You Retire?
Step-by-step process:
- Your individual corpus is compared with the benchmark corpus calculated by PFRDA.
- You must authorize transfer of your corpus to the pool corpus.
- If your corpus:
- Is equal to benchmark: You get full pension
- Is less than benchmark: You can contribute extra or receive proportional pension
- Is more than benchmark: Extra funds are credited to your account
Benchmark Corpus: Explained
The Benchmark Corpus is the amount your pension fund should have at retirement to ensure you get the full pension.
It is calculated by PFRDA assuming:
- Regular contributions from you and the Government
- No gaps in deposits
- Investment as per the default pattern
You’ll be informed periodically about both:
- The value of your corpus
- The required benchmark corpus
This helps you track your pension readiness.
Existing NPS Corpus Transfer
If you are an NPS subscriber and choose UPS:
- Your existing NPS balance (PRAN account) will be moved to the individual corpus under UPS.
Past Retirees Can Also Join
If you retired before 1 April 2025, you can still join UPS. Here’s how:
- PFRDA will calculate how much extra you should have received (top-up).
- You’ll get arrears + interest (PPF rate).
- Any annuities already paid will be adjusted.
Some Limitations
- If you opt for UPS, you cannot later claim:
- Special retirement benefits
- Parity with future retirees
- Policy changes or enhancements
- Separate rules will be issued for those facing disciplinary cases during or after retirement.
Annexure: Real-Life Examples
The official notification provides scenarios to show how pensions are calculated, including:
- Different lengths of service (10, 15, 25 years)
- With or without partial withdrawals
- With investment gains or shortfalls
These examples make it easier to understand how much pension you’ll actually get.
When Does the Scheme Start?
The Unified Pension Scheme (UPS) will be operational from 1 April 2025.
The Pension Fund Regulatory and Development Authority (PFRDA) will issue further guidelines for implementation.
Final Thoughts
The Unified Pension Scheme is a significant step toward providing pension security to Central Government employees. It offers a blend of NPS flexibility with the certainty of a fixed pension. Whether you are an existing employee or already retired, this scheme can provide long-term benefits if opted wisely.
However, remember:
“Once you opt in, the decision is final.”
Make sure to review your finances, consult your pay office, and decide whether this pension path suits your needs.
