The government has started a new facility for central employees. In a notification issued on Monday, the government said that employees can switch from the Universal Pension Scheme (UPS) to the National Pension System (NPS) one time. But this facility is only for a limited time. Employees can switch from UPS to NPS only till 30 September 2025.
Central employees can use this option one year before retirement. In case of voluntary retirement, they can do it three months before the retirement date. Let us know about the main features of both UPS and NPS pension schemes.
What is the Universal Pension Scheme?
The Modi government started the Universal Pension Scheme in 2024. This scheme is for all central employees. Under UPS, employees get a fixed pension, which is 50% of the average basic salary of the last 12 months before retirement. But the service period must be 25 years. If the service is more than 10 years, then after retirement one gets a minimum pension of ₹10,000 every month.
UPS Features and Drawbacks
In UPS, government employees give 10% of their basic salary and DA, while the government gives 18.5%. This share is higher than NPS. If the pensioner dies, the family gets 60% of the last pension. This scheme also has benefits like pension increase with inflation and gratuity.
But, there are some drawbacks. At the time of retirement, no lump sum is given. Tax benefits are not clear. Also, investment options are fewer compared to NPS.
What is National Pension Scheme (NPS)?
The National Pension Scheme started in 2004. In 2009, it was opened for private sector, self-employed people, and NRIs. NPS is a market-based pension scheme. The return depends on how much you invest.
In this scheme, employees also contribute regularly. After retirement, 60% of the money can be taken out tax-free, while 40% must be used to buy an annuity.