The last chance for central government employees to switch from the National Pension System (NPS) to the Unified Pension Scheme (UPS) has passed. The deadline was set for November 30, 2025, and this deadline has now passed. The biggest news is that there has been no official announcement from the government regarding the extension of this deadline. This simply means that employees who failed to opt for UPS within the stipulated time will no longer be able to participate in this better and more secure pension scheme.
The UPS, which came into effect in April 2025, sparked a heated debate within government circles by promising a stable and assured monthly pension compared to the market-based NPS. With the deadline now passed, there is now anxiety among millions of employees who waited until the last minute. However, the situation so far is clear: no concessions are forthcoming.
Unified Pension Scheme
UPS was specifically designed to meet the needs of government employees who desired a guaranteed monthly pension, rather than the market-linked return system of the NPS. This scheme promises to provide a strong wall of financial security for employees. Under this powerful scheme, the rules are quite clear. Employees are required to contribute 10% of their basic salary and dearness allowance (DA), and the government contributes an amount equal to the employee’s contribution (10%).
Most importantly, the government also contributes an additional 8.5% of the amount to a ‘Pool Corpus’ fund. This fund is designed to ensure the smooth and certain future pension payments. Unfortunately, employees who have not opted for UPS within the stipulated timeframe will now be considered covered under the NPS by default, and it will be impossible for them to exit the old scheme.
Simple Formula and Terms of Pension in UPS
The method of calculating pension under UPS is extremely simple and transparent. Full pension benefits are available only if the employee has served for at least 25 years. In such cases, the pension amount will be 50% of the employee’s average basic salary for the 12 months immediately preceding their retirement.
Employees with less than 25 years of service will receive a proportionate pension. Significantly, employees with 10 years or more of service are guaranteed a minimum pension of ₹10,000 per month. However, this guarantee is only available if contributions are made on time and no partial withdrawals are made. Employees who take voluntary retirement (VRS) will also receive their pension at the same age at which they would normally retire.
Tax Similarities Between UPS and NPS
In terms of taxation, both UPS and NPS have nearly identical provisions, offering significant tax benefits to employees. Contributions made by employees are eligible for tax deduction under Section 80CCD(1) of the Income Tax Act. This exemption is limited to 10% of basic salary and DA. The government had touted the scheme as highly transparent and employee-friendly, but the failure to extend the deadline has caused significant disappointment among employees who failed to register their option even in the final days.
Is there any hope left
At present, the situation is clearly bleak. There has been no official indication from the central government about opening a new window for UPS or extending the deadline. It is conclusively clear that only those employees who opted for UPS will be able to avail themselves of the excellent benefits of UPS. Those who missed this opportunity will now remain in the existing NPS framework by default. This is a lesson for employees about the importance of timely decision-making in government schemes.