Do you want to switch from UPS to NPS? The central government has given a one-time opportunity to switch, know in detail

UPS to NPS: Central Government Employees Get One-Time Option to Switch – Here’s Everything You Need to Know

The Finance Ministry has introduced a major update for central government employees regarding their retirement planning. Employees who are currently under the Unified Pension Scheme (UPS) will now be allowed to switch to the National Pension System (NPS). This option, however, is available only once in a lifetime and cannot be reversed.

According to the notification, employees can avail of this facility up to one year before their retirement or, in the case of voluntary retirement (VRS), up to three months prior. However, those facing disciplinary proceedings will not be eligible for this benefit.

What Does the Switch Mean?

The move from UPS to NPS comes with significant implications. Once an employee opts for NPS, they will no longer be entitled to the assured pension payout and other benefits offered under UPS. Instead, the government will contribute an additional 4% differential amount directly into the employee’s NPS corpus.

This contribution will grow within the NPS structure and will be subject to the withdrawal rules set by the Pension Fund Regulatory and Development Authority (PFRDA). Essentially, the government’s top-up is designed to make NPS a more attractive and rewarding option in the long run.

Why Has the Government Introduced This Change?

The central government has clarified that the move is aimed at making the pension system more flexible, structured, and future-ready. NPS, being a market-linked scheme, offers the potential for higher returns over time compared to the guaranteed but limited payouts of UPS.

Finance Minister Nirmala Sitharaman recently informed Parliament that as many as 7,253 claims have been filed under UPS. Out of these, 4,978 have already been settled and paid. At present, 25,756 retired central government employees are eligible to receive additional benefits under UPS.

By introducing this one-time switch, the government aims to streamline the retirement framework and provide employees with a choice that aligns with their financial planning goals.

Who Can Benefit?

This new provision applies exclusively to central government employees. The Unified Pension Scheme (UPS) was implemented only for them as an alternative to NPS. The Finance Ministry has made it clear that, at least for now, UPS will not be extended to employees in other sectors or included in other pension schemes.

Employees nearing retirement or those considering voluntary retirement may find this option particularly useful, as it allows them to realign their pension planning to match long-term goals such as wealth creation, retirement flexibility, and inflation-adjusted returns.

Key Highlights of the UPS to NPS Switch

• One-time, one-way option – Once exercised, it cannot be reversed.

• Timeline for availing – Up to one year before retirement or three months before VRS.

• Ineligibility – Employees facing disciplinary action cannot switch.

• Impact on benefits – Assured payouts under UPS will cease.

• Government support – 4% differential contribution will be added to the NPS corpus.

• Exclusive to central government employees – No expansion to other sectors for now.

Final Thoughts

The government’s decision to allow central employees to move from UPS to NPS is a step toward creating a more dynamic and growth-oriented pension ecosystem. While UPS ensures stability, NPS opens the door to long-term wealth accumulation and retirement flexibility.

Employees must carefully weigh their options, considering both short-term security and long-term financial independence. Since the switch is a one-time opportunity, timely decision-making will be crucial.