The Pension Fund Regulatory and Development Authority (PFRDA) has issued new rules for implementing the Unified Pension Scheme (UPS) under the National Pension System (NPS). These rules, called “Pension Fund Regulatory and Development Authority (Operationalisation of Unified Pension Scheme under National Pension System) Regulations, 2025” have been notified on March 19, 2025, and will come into force on April 1, 2025.
The entire framework, responsibilities, and procedures for implementing UPS have been laid down under these new rules. This scheme will be an option for those central government employees who are already covered under NPS. This includes existing employees, newly recruited employees, and those retired employees who were earlier under NPS. Also, if a retired employee who had opted for NPS dies, then his duly married wife will also get the right to avail the benefits of UPS.
These rules issued by PFRDA also clarify some important terms and definitions, such as “admissible payout”, “family payout” and “default pattern”. Apart from this, the intermediaries who will be involved in implementing this scheme will have to maintain the consistency of data, follow the instructions of PFRDA, and inform about any change if there is any.
Also read: Unified Pension Scheme from April 1: Who qualifies for 50% guaranteed pension?
What is UPS, and who can opt for it?
The PFRDA notification clarified that the scheme will be available to those central government employees who already come under the NPS. This includes employees already in service, newly recruited employees and those retired employees who were earlier under the NPS.
Apart from this, if a retired employee who was in NPS has died and had not opted for UPS, then his legally married wife can avail the benefits of this scheme.
When and how can one opt for UPS?
Employees who want to opt for UPS will have to apply within three months from April 1, 2025. At the same time, newly recruited employees will have to take this decision within 30 days of their joining. If the government deems it necessary, it can also extend this time limit. But once UPS is chosen, it cannot be changed. Therefore, this decision has to be taken carefully.
How to apply for UPS?
To avail the benefits of UPS, employees have to fill out different forms. Form A2 for existing employees, Form A1 for newly recruited employees, Form B2 for retired employees and Form B6 for the wife of the deceased pensioner.
To make the application process easier, it can be done both online and offline. Online application can be done on the CRA portal, while offline application can be done through the Head of Office or DDO of your department. If an eligible employee does not apply on time, he will remain in NPS and will not be able to avail the benefits of UPS.
Also read: Unified Pension Scheme to be operational from April 1: Key features, benefits, eligibility
Employee and government contribution in UPS
Under UPS, employees will have to contribute 10% of their basic salary and dearness allowance every month. The government will also deposit the same amount in the employee’s account. Apart from this, the government will put an additional 8.5% amount in the ‘Pool Corpus’, from which the entire pension scheme will be run.
This scheme will be run in a fund-based manner, that is, the money deposited will be invested. Later, when the employee retires, he will be paid pension from the same investment.
How will investment and fund management be done in UPS?
The amount deposited in UPS will be invested in two ways. First, Individual Corpus, in which the employee can invest his amount in government securities (Scheme G) or life cycle based funds (LC-25, LC-50). Second, Collective Corpus (Pool Corpus), which will be operated as per the rules set by the government.
When the employee retires, if there is excess amount in his fund, it will be given to him. But if the amount in his fund is less, then either arrangements will have to be made to complete it or his pension may be reduced.
Pension and other benefits in UPS
Pension under UPS will be given only to those employees who have completed at least 10 years of service. If an employee takes voluntary retirement (VRS) after completing 25 years of service, he will also get the benefit of pension under UPS. At the same time, if an employee is forcibly retired under Fundamental Rule 56 (j) (provided it is not a disciplinary action), then also pension will be available under UPS.
After retirement, the employee will be given a lump sum amount and regular pension. This amount will be decided on the basis of (last basic salary + dearness allowance) / 10 × six months of service completed.
Withdrawal of funds after retirement and family pension
When the employee retires, he can withdraw up to 60% of his total corpus. But this will affect his regular pension. If the employee dies, his duly married wife will get 60% of the last received pension for life. Apart from this, he will also be given a lump sum payment and other benefits.
Dearness Relief will be available only to those employees who have started receiving pension.
Partial withdrawal facility under UPS
Under UPS, employees will be allowed partial withdrawal a maximum of 3 times after a lock-in period of 3 years. They can withdraw a maximum of 25% of their own deposit, but this will be possible only for certain needs. Such as:
-Children’s higher education or marriage
-To buy or build a house (if there is no house already)
-Expenses related to serious illness or disability
-For learning new skills or self-development
If the employee is ill and is not in a position to apply himself, then a member of his family can apply for him. After partial withdrawal, employees can refill it if they want, so that their pension is not affected.