UPS For State Government: Is It Mandatory? Minister Clarifies

Unified Pension Scheme (UPS) will become effective from April 1, 2025. The government notified the scheme on January 24, 2025, and on March 20, 2025, the gazette notification has been issued with detailed regulations around it. Notably, this scheme is for central government employees. They have the option to continue with the National Pension Scheme (NPS) or switch to UPS. The deadline to exercise the option is three months from the effective date.

Regarding the scheme, parliamentarian Dr. Anbumani Ramadoss in Rajya Sabha on March 25, 2025, questioned whether the government will make the scheme mandatory for state governments as well.

In response, Pankaj Chaudhary, Minister of State for Finance, gave a written reply. It reads, “Unified Pension Scheme (UPS) is a defined benefit-based contributory pension scheme notified by the Government on 24.01.2025, as an option for Central Government employees covered under National Pension System (NPS), to address the concerns regarding assured monthly payout after retirement”.

He clarified that the scheme is for central government employees and applying it to the states is the individual state’s choice. His reply read, “The regulation of service conditions of State Government employees falls under the administrative domain of respective State Governments”.

While the effective date for UPS is only a week away, recently many questions about the scheme have been asked in parliament’s lower and upper house. In another question in Lok Sabha around the reintroduction of the old pension scheme (OPS), Chaudhary clarified that the OPS is a non-contributory, fully funded scheme by the government, and there is no proposal under consideration to reintroduce it. On the other hand, UPS will become effective from April 1, this year for central government employees as an option to switch from an unguaranteed pension under NPS to an assured pension under UPS.

UPS is a defined contribution and defined benefit scheme designed to provide an assured payout to the subscribers.

“The UPS has been envisaged to address the demand of the employees covered under the National Pension System (NPS) regarding assured pension after retirement while ensuring fiscally responsible funded and contributory pension scheme”, he said in the reply.

As of now, UPS is for the central government employees, clarified the Minister. Also, it is not mandatory for state government but they have the freedom to adopt the scheme.