Switching To UPS: 3 Additional Benefits For Those Who Retired Under NPS Before March 31, 2025

The deadline to switch from the National Pension System (NPS) to the Unified Pension Scheme (UPS) for central government employees is June 30, 2025.

The switching option is available for existing employees, new employees, and retirees. However, those who retired on or before March 31, 2025, can avail of the additional benefits over and above NPS if they opt for UPS.

According to a circular by the Ministry of Finance, dated May 30, 2025, central government NPS subscribers who retired on or before March 31, 2025, with a minimum of 10 years of qualifying service, or their legally-wedded spouse, can switch to UPS and claim the additional benefits under UPS, over and above the benefits available under NPS.

Additional Benefits Available For Retirees Under UPS

According to the circular, there are three additional benefits available to those who have retired under NPS.

1. One Time Lump Sum Payment: 

The amount is one-tenth of the last drawn salary (basic + dearness allowance) for each completed six months of qualifying service.  

2. Monthly Top-Up: 

This is an additional payout over the annuity paid under NPS. It will be calculated based on the following formula –

Monthly top-up = (Admissible UPS Payout + Dearness Relief) - Representative Annuity Amount under NPS)

Bertram D'souza, chief product and innovation officer, Protean eGov Technologies says, “The computation of representative annuity amount for such person shall be based on the annuity rate declared by the Authority, utilising a percentage of the individual corpus under NPS Tier-I annuitised at the time of exit from NPS.”

3. Arrears: 

The additional amount to be paid for previous months is referred to as arrears.

D'souza adds, “Arrears refers to the back payments due to a retiree after switching to UPS, which include unpaid monthly top-up amounts, and unpaid lump sum (if applicable), from the month following superannuation up to the month before claim submission.”

It will be calculated at simple interest applicable to the Public Provident Fund (PPF).

However, the question arises:

If a subscriber has already withdrawn 60 per cent of the NPS corpus at superannuation, then, will a one-time lump sum under UPS still be paid?

D’Souza adds, “Retirees are still eligible for a one-time lump sum payment under UPS, which is separate from the 60 per cent NPS corpus withdrawal.” 

Further, the lump sum paid under UPS will not affect the assured monthly payout under UPS.

Will Annuity End Once A Retiree Switches To The UPS?

He says that the existing NPS annuity does not end when a retiree switches to UPS. Instead, the UPS payout, which is inflation-adjusted (admissible payout + dearness relief) is calculated after deducting the representative annuity amount.

“UPS acts as a top-up scheme—bridging the gap between what the annuity pays and what UPS assures,” D’Souza adds.

At present, UPS is available only for central government employees. However, state governments may opt for it if they want. There are around 2.3 million central government employees who need to exercise their preferred pension option by the end of this month.

The government has also launched the UPS calculator, making it easy for eligible employees and retirees to calculate and compare UPS and NPS projected payouts, and make an informed decision.

How To Switch From NPS To UPS

Retirees can exercise their option to switch from NPS to UPS either offline or online.

Offline Option: Under this, a retiree (retired on or before March 31, 2025) needs to visit the Drawing and Disbursing Officer (DDO) office and submit the stipulated form. There are two types of forms: Form B2 is for subscribers, and Form B4 or B6 is for the legally-wedded spouse. The forms can also be downloaded from the NPS official websites.

Online Option: A subscriber needs to access the required form on the official website, fill it out, and submit it online.

The deadline to exercise the switch option is June 30, 2025. Yet, only less than 10 per cent of the eligible employees exercised the option by the mid of last month.

As of now, there is no information on whether the deadline will be extended further.