NPS-UPS Switch- Big news for government employees. The government has given a one-time opportunity to central and state employees to switch from NPS (National Pension System) back to UPS (Unified Pension Scheme / Scheme providing benefits like old pension scheme). This facility will be available till 30 September 2025. That is, employees who want to choose UPS instead of NPS will have to apply within the stipulated time limit. Employees have to take this decision carefully as it is a one-time switch. Once UPS is chosen, they will not be able to return to NPS again. UPS has a provision for fixed pension, whereas NPS is completely based on investment, in which the return depends on the performance of the market.
What is the difference?
In UPS (Unified Pension Scheme), the employee gets a guaranteed pension, which is 50% of the average basic salary of the last 12 months. This facility is available only if the employee has completed at least 25 years of service.
NPS (National Pension System) is completely market-linked. In this, the money and pension (annuity) received at the time of retirement depends on the performance of the money invested (in shares, bonds and government securities).
Let us tell you that this basic difference makes this decision very important, especially for those employees who are close to retirement.
Timeline and Terms
- Employees must decide to make this switch at least 1 year before retirement or 3 months before voluntary retirement (VRS). After this, this option will not be available.
- This facility will not be available in cases where the employee has been dismissed, disciplinary action is pending, or has been given compulsory retirement as a punishment.
- Employees who do not exercise this option will automatically be covered under UPS (Unified Pension Scheme).
Why is it important?
With just over a year until the deadline, financial experts say employees should evaluate their situation.
Risk appetite: NPS has market risk but can offer higher returns in the long run.
Tenure of service: Full pension benefits in UPS will be available only after completing long service (25 years).
Retirement Plans: Younger employees may prefer the flexibility of NPS, while those nearing retirement will find the guaranteed pension of UPS more secure.
