UPS VRS Rules: Voluntary Retirement After 20 Years, But Pension Starts At Superannuation, What Employees Must Know

With the approaching September 30, 2025, the last date to carry out the switch option from the National Pension System (NPS) to the Unified Pension Scheme (UPS), the government urges the employees to opt for UPS before the deadline. The scheme's regulatory authority, the Pension Fund Regulatory and Development Authority (PFRDA), has been actively alerting the applicants to exercise the option by the cut-off date if they want to enrol in the UPS. Failing to opt means they remain enrolled in the NPS. Lately, PFRDA made a crucial change and made switching back to the NPS possible, in case an employee wants; however, it will be a one-time option with certain conditions.

Notably this update came only in the last week of August 2025. The switch back wasn't originally included in the UPS. Earlier, the option from NPS to UPS was irrevocable, which possibly have made the employees wary of switching to UPS, reflecting in low adoption.

Note that the UPS was announced in 2024 and was implemented on April 1, 2025, as an irrevocable option, without gratuity benefits, and without clarity on taxation. While these issues have been addressed later, confusion still persists among employees for different reasons.

One of the confusions is also about the pension in case of voluntary retirement.

Gazette Notification, Dated January 24, 2025

Initially, the assured pension under voluntary retirement was permitted only when an employee had served a minimum of 25 years of continuous service. According to the Gazette notification of the Department of Financial Services, Ministry of Finance, dated January 24, 2025, the assured payout in case of voluntary retirement will be available "after a minimum qualifying service period of 25 years, from the date such employee would have superannuated, if the service period had continued to superannuation." 

The eligibility period for voluntary retirement under UPS was changed recently.

Gazette Notification Dated September 2, 2025

The Department of Pension and Pensioners' Welfare under the Ministry Of Personnel, Public Grievances And Pensions, through Gazette notification dated September 2, 2025, notified that "At any time after a subscriber has completed twenty years' regular service, he may, by giving notice of not less than three months in writing to the appointing authority, retire from the service."

Its para 13 (6) reads, "The subscriber, on voluntary retirement from service before completion of twenty-five years of qualifying service, shall be entitled to pro-rata assured payout admissible under the Pension Fund Regulatory and Development Authority (Operationalisation of Unified Pension Scheme under National Pension System) Regulations, 2025."

Under the rules, taking VRS after 25 years of qualifying service will mean "full assured payout".

The personnel ministry also said in a statement, "The full assured payout under the Unified Pension Scheme is available only after completion of 25 years of qualifying service. However, on opting for VRS (voluntary retirement scheme) after completion of 20 years or more service, assured payout on pro rata basis i.e. year of qualifying service divided by 25 of the assured payouts shall be payable to subscriber."

When Will The Assured Payment Be Made In Case Of VRS?

PFRDA issued revised FAQs on September 19, 2025. Per them, "The subscriber, on voluntary retirement from service after completion of twenty years, shall be entitled to pro-rata assured payout, as admissible."

However, "The subscriber is eligible to receive a one-time Lump-sum Payment (10 per cent) and Finals Withdrawal (60 per cent) immediately at the time of VRS."

So, while the period of qualifying service for VRS has been reduced from 25 years to 20 years under the UPS, the assured payment will not start immediately after the date of voluntary retirement.

There should be no confusion that it will start only after the date on which such an employee would have retired if they had continued their service.