The deadline for central government employees to switch to the Unified Pension Scheme (UPS) has been extended for the second time. The Finance Ministry has this time extended the due date to exercise the UPS option by another 2 months till November 30, 2025, on requests from employees and other stakeholders for some additional time.
The UPS was launched on April 1 this year. Initially, the government fixed June 30 as the UPS deadline for eligible existing employees, past retirees and the legally wedded spouses of deceased retirees covered under the National Pension System (NPS). This was later extended to September 30 and now till November 30. The UPS is actually launched as an additional pension scheme option for central government employees covered under the NPS.
In view of slow response from government employees for the UPS, the government has made several changes to the originally conceived scheme. Among some major updates were – provisions related to switching from other schemes, benefits on resignation and compulsory retirement, and tax exemptions. After these changes were made, many employees sought additional time to decide whether they should opt for UPS or stay with the NPS.
Meanwhile, several employees posed a query on social media asking if they can have both NPS and UPS. The answer is yes, but with a rider. While they can opt for the UPS and open an NPS account, but the latter should be opened under the ‘All Citizen Model’.
The Pension Fund Regulatory and Development Authority (PFRDA) has also answered this query as one of the FAQs (frequently asked questions) on its website. The question is –
Will UPS subscribers still be able to open/maintain/hold voluntary NPS Tier-1/2 accounts?
“Yes, UPS Subscriber may, in addition to his UPS account, have additional account under NPS (Tier I and Tier II) on a voluntary basis under All Citizen model,” the PFRDA portal answers.
This means that employees who opted for UPS can still avail NPS benefits, provided they voluntarily adopt it.
What is UPS and who was eligible?
The UPS is a pension scheme introduced for central employees, aimed at promoting simple and streamlined pension management. The main eligible beneficiaries of UPS are central government employees appointed after January 1, 2004, and who opted to switch from NPS to UPS. UPS invests a combination of employees’ monthly contributions and government contributions into a pension fund.
Under UPS, the pension amount is determined based on the employee’s service, contributions, and the fixed retirement age. This scheme offers greater stability and regulation than traditional defined benefit pensions.
NPS: For government employees and the general public
The NPS is a pension scheme open to all Indian citizens. For government employees, it comes as an option to opt for the mandatory NPS (Tier-1 for central government employees) or UPS, while general citizens can join NPS voluntarily under the All Citizens Model.
Tier-1 Account: This is the main pension account. Investments are locked in for a long period, and withdrawals are made as a regular pension upon retirement.
Tier-2 Account: This is a flexible account for capital investment. It has no specific restrictions on investments and withdrawals and offers additional tax planning options.
Government employees enrolled in UPS can still open Tier-1 and Tier-2 NPS accounts and invest their pension funds in various options.
Difference between UPS and NPS
UPS: For government employees only, offers a defined benefit pension, with monthly contributions based on pension.
NPS (Tier-1/2): Open to all citizens, long-term lock-in in Tier-1, flexibility in Tier-2, and market-linked returns.
Government contributions are guaranteed in UPS, while NPS offers market-based returns on investments.
Context of OPS
OPS, or Old Pension Scheme, is the traditional defined benefit pension scheme. UPS and NPS were introduced as alternatives to OPS to provide greater transparency and investment options for new employees.
Summing up…
Central government employees have been clarified that despite joining the UPS, they can voluntarily open an account under the All Citizens Model under the NPS. This provides employees with additional pension benefits and investment options. The option to open both Tier-1 and Tier-2 accounts in the NPS also provides them with financial flexibility and tax benefits in the future.