UPS vs NPS: Deadline Nears for Government Employees — 8 Key Changes You Must Know Before Switching
The deadline for government employees to choose between the National Pension System (NPS) and the newly introduced Unified Pension Scheme (UPS) is fast approaching. Those who wish to secure a fixed pension after retirement must switch to UPS by September 30, 2025.
The government first announced UPS through a notification on January 24, 2025. Since then, several revisions have been made, especially after June, to make the scheme more attractive for employees. With the deadline just days away, here’s a detailed look at the eight major changes in UPS that every employee should know before making the switch.
1. One-Time Return Option to NPS
Employees opting for UPS now have the flexibility to return to NPS if they find the scheme unsuitable. However, this option can only be used once in an entire service period, ensuring employees have room to reconsider but also preventing frequent switching.
2. Financial Security in Case of Death or Disability
UPS now ensures protection for employees and their families in the event of death or permanent disability during service. Benefits will be provided under the CCS (Pension) Rules or the PFRDA guidelines. This change gives employees peace of mind that their families will remain financially secure.
3. Benefits Even in Pending Cases
Previously, employees facing departmental or judicial proceedings at retirement risked losing benefits. UPS has revised this rule — now, employees will continue to receive their pension benefits even if cases are pending. This reform provides much-needed certainty at retirement.
4. Major Tax Relief
One of the most significant reforms in UPS is full tax exemption on the lump sum received at retirement under the Income Tax Act, 2025. This means employees not only get a secure pension but also enjoy major tax savings, reducing their financial burden post-retirement.
5. Retirement and Death Gratuity Benefits
Unlike NPS, UPS allows employees to receive both retirement gratuity and death gratuity. This ensures that employees or their families receive a lump sum amount either at retirement or in case of death, providing greater financial security.
6. Pension on Voluntary Retirement
UPS now extends pension eligibility to employees opting for voluntary retirement after 20 years of qualifying service. They will receive a pro-rata pension, which is especially beneficial for those who wish to retire early but still need assured income.
7. Validity in PSU and Autonomous Bodies
Employees absorbed into public sector undertakings (PSUs) or autonomous bodies during their career will continue to receive UPS benefits. This portability ensures that pension rights are preserved even if employees shift roles within government-related institutions.
8. Deadline Extended for Employees
Initially, the last date to opt for UPS was earlier, but the government has now extended the deadline to September 30, 2025. In addition, those who joined government service between April 1, 2025, and August 31, 2025, can also switch to UPS, giving new employees the opportunity to benefit from the scheme.
Final Word
The Unified Pension Scheme (UPS) is being positioned as a more secure and flexible option compared to the National Pension System (NPS). With benefits like tax relief, gratuity, death and disability protection, and portability, the scheme addresses many concerns employees had under NPS.
However, the choice is crucial and irreversible in many respects. Since the deadline of September 30 is just around the corner, government employees must carefully assess these changes before making a final decision.
