As the Unified Pension Scheme (UPS) has become effective today, April 1, 2024, central government employees can opt for it. The deadline to do so is three months from today. The choice to opt for the UPS is available only once during this period and once selected it cannot be changed.
The gazette notification on March 20, 2025, mentioned the deadline. It reads that the choice can be exercised, "within three months from 1st April 2025, or within such extended timelines if any, allowed by the Central Government".
However, for those who joined the service on or after April 1, 2025, the time period for exercising the option is 30 days from the date of joining the central government service or any extended timeline allowed by the government.
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Switching can be done by filing relevant forms. To know the details, click here.
According to a government statement earlier, this scheme will apply to approximately 2.3 million central government employees. States are at liberty to extend the scheme to their respective state government employees if they want.
Since this is an irrevocable option, eligible employees should be aware of important considerations before making their choice.
Key Factors To Weigh Before Opting In Or Switching From NPS:
Vivek S.G., a certified financial planner and founder of Wealth Crafts, a Securities and Exchange Board of India-registered investment advisor (Sebi-RIA), explains, “The most important factors to consider are your risk profile, your current age, and the number of years left for retirement”.
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Age, Risk Profile, And Number Of Years To Retirement:
“There is no single answer to this question. If you are an aggressive investor NPS is most likely suitable for you. If you have just started your career and are open to working for the next 25 – 35 years, NPS will help you accumulate higher corpus as you can allocate 75 per cent of the corpus to equity”, says Vivek.
According to him, people with an aggressive risk profile or who have just started their career are better off sticking to NPS. Someone in the mid-age bracket, say a 45-year-old person, who has been contributing to the NPS may also stay with NPS “as the expected pension under UPS may be lower than in NPS”, says he.
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Is UPS Better Than NPS?
While the debate whether UPS is better than NPS, Kavitha Menon, a Securities and Exchange Board of India (Sebi)-registered investment advisor (RIA), says, “The UPS offers stability of pension and is certainly a great feature for central government employees who had to forcefully move out of the older pension scheme (OPS) into NPS. However, the advantages of NPS are that over long periods of time it can offer higher returns, and you can change jobs and continue NPS (even if you moved to the private sector)”.
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A valid point! NPS is one of the most flexible schemes for long-term planning. But at the same time, Menon highlights another point.
She says, “There is a current disadvantage in NPS versus UPS. On retirement, the employee has to commute 60 per cent and the balance is to be invested in an Annuity (or else it is taxable). In India Annuities are typically low-yielding products and may not even beat inflation whereas UPS offer an inflation-hedged pension for life”.
Needless to say, UPS with its assured pension feature can provide employees peace of mind and less uncertainty. However, NPS may offer higher returns.
Vivek Suggests, “For investors with moderate risk profile who want an assured cash flow, UPS is a better option as the pension payout is also inflation-protected”. However, he also puts forth the benefits of NPS as well saying that NPS remains an attractive option for those who understand their risk profile and can stay calm during market volatilities.
“An investor must weigh in these factors before making a decision. Those seeking flexibility should continue with NPS in my opinion”, suggests Menon.
While there is still time to think about the right choice for you, you may like reading UPS or NPS: Which One Should You Choose
