The central government has given a very important opportunity to its employees. Now they can go back to the National Pension Scheme (NPS) from the Unified Pension Scheme (UPS). The Finance Ministry has made it clear that this facility will be available only once, and after that, there will be no option to return to UPS.
Eligible employees and retired employees can use this option till 30 September 2025. If an employee does not decide by this time limit, he will be considered in UPS. This decision is very important for those who want to move from a fixed benefit UPS to a market-based NPS.
Terms and conditions for switching to NPS
The government has laid down some clear conditions for switching from UPS to NPS. First of all, this option can be used only once. Once you go to NPS, you will not be able to come back to UPS. Second, the employee has to choose this option at least one year before his retirement or three months before voluntary retirement (VRS), whichever is earlier. Apart from this, employees against whom punitive action is going on will not be able to avail themselves of this facility.
Which is better for you?
Both pension schemes have their own advantages and disadvantages, which will help you decide.
Unified Pension Scheme (UPS)
This is a low-risk, government-guaranteed scheme. In this, you get a fixed pension which is linked to DA. In this, the employee contributes 10% and the government contributes 18.5%. UPS also offers benefits like gratuity and family pension, but it has less flexibility on investment, and there is also less possibility of high returns.
National Pension Scheme (NPS)
This is a market-based scheme in which investments are made in equity, corporate bonds, and government securities. It has the potential for high returns as it is linked to the market. The employee contributes 10% and the government contributes 14%. In NPS, you can withdraw 60% of the amount in a lump sum and also get tax benefits under Section 80C. However, it carries market risk and does not provide dearness allowance or family pension.
You should make this decision based on your future needs and risk-taking ability. Remember, you have until 30 September 2025 to make this decision.