The Unified Pension Scheme (UPS) is a newly approved pension scheme aimed at providing a comprehensive pension plan for central government employees in India. The scheme is designed to offer post-retirement financial security with assured pensions, family pensions, and other benefits.
Currently, government employees are covered under the National Pension System, which offers market-linked returns. If employees want to, they can continue under NPS. However, for many, UPS may be a better option, depending on their needs. To make the right choice between the two, here’s an overview of UPS.
What is the Unified Pension Scheme?
UPS is a new retirement scheme. It was introduced by the Central Government to provide a predictable, guaranteed pension to employees.
The scheme was launched on 24 August 2024. UPS ensures a minimum guaranteed pension to its subscribers, along with inflation-linked Dearness Relief, a family pension, and a lump sum benefit (commuted pension) at retirement.
The following table highlights key aspects of the Unified Pension Scheme:
UPS Aspect
| Details
|
Employee Contribution
| 10% of basic pay + DA
|
Government Contribution
| 18.5% of basic pay + DA
|
Guaranteed Pension
| 50% of average basic pay of the last 12 months (for those with 25 years of service)
|
Minimum Pension
| ₹10,000 per month (for those retiring after 10 years of service)
|
Family Pension
| 60% of the pension last drawn
|
Eligibility
| Central Government employees; new entrants after 1 April 2025; switching allowed within deadline
|
Inflation Protection
| Dearness Relief (DR) based on AICPI-IW
|
Main Difference between UPS and NPS
| NPS offers market-linked returns; UPS offers assured pension untouched from market fluctuations.
|
A quick piece of trivia:
As of July 20th, 2025, more than 31,000 central government employees have already opted for the Unified Pension Scheme.
Key Features of the Unified Pension Scheme
Let’s take a look at the fundamental features of this pension scheme.
Assured Pension
The assured pension is calculated as 50% of the average basic pay drawn during the last 12 months before superannuation. To be eligible, employees must complete a minimum of 25 years of service. Those with shorter service periods (at least 10 years) can receive a proportional pension.
Assured Family Pension
In the event of the employee's death, the family will receive a pension amounting to 60% of the assured pension the employee was entitled to before their demise.
Minimum Pension
Employees who retire after completing at least 10 years of service are guaranteed a minimum pension of ₹10,000 per month.
Inflation-Linked Pension
The pension will be adjusted for inflation and indexed to the All India Consumer Price Index for Industrial Workers (AICPI-IW) to ensure it maintains its value over time.
Lump Sum Payment
Upon superannuation, retirees will receive a lump sum in addition to the regular pension. This commuted pension amount is calculated as one-tenth of monthly emoluments (pay + DA) for every six months of completed service. It will not affect the assured pension amount.
Benefits of UPS for Retirement Planning
Here are some of the benefits of this scheme that can help you include it in your retirement planning.
1. Long-Term Financial Security
UPS offers consistent income during retirement, safeguarding retirees from inflation and ensuring their financial independence. For individuals planning for retirement, integrating the UPS with pension plans, such as a unit-linked pension plan from an insurer, can provide an effective hedge against rising costs of living.
2. Family Pension Support
In the unfortunate event of an employee's death, the UPS ensures a continued pension flow to the surviving spouse or dependent family members. This family pension is a cornerstone of pension plans and a critical consideration for those responsible for dependents.
3. Lump Sum Benefit
Upon retirement, retirees receive a lump sum payout that adds to the overall financial flexibility. The lump sum can be used for large expenses, such as home modifications or paying off debts. This additional layer of commuted pension makes it an attractive option within retirement plans.
4. Inflation Protection
The inflation-linked nature of UPS benefits shields retirees from the corrosive effects of inflation. As pensions are adjusted to reflect consumer prices, retirees can maintain their purchasing power over time, making this scheme more reliable than other non-indexed retirement plans.
Eligibility for the Unified Pension Scheme
The primary eligibility criteria for this scheme are as follows:
1. Minimum Service Period
Employees must serve a minimum of 10 years to be eligible for pension benefits. Those who complete 25 years of service receive the full assured pension, while shorter service periods yield proportionate benefits.
2. Central Government Employees
The scheme is meant for existing as well as newly-recruited central government employees. For those in government jobs, UPS can be an ideal (and safe) addition to existing pension plans.
3. Retired Government Employees
Those government employees who were previously under the NPS, and have retired (including superannuation, voluntary retirement, or retirement under FR 56(j)) on or before March 31, 2025, are also eligible for this pension scheme.
4. Surviving Spouses
If an employee who qualified as a retired NPS subscriber (as above) has passed away before making a choice for their pension (UPS), their legally wedded spouse can also be eligible for UPS.
Unlike other financial products, such as life insurance plans, UPS does not impose a strict age cap for participation, although it naturally applies to those who retire from service.
How to Apply for the Unified Pension Scheme (UPS)
You can apply for UPS online as well as offline. Here’s a look at both methods:
Online route
Step 1. Go to the Protean (NSDL) portal and open the Unified Pension Scheme section.
Step 2. Choose the correct option: ‘Migrate from NPS to UPS’ (if you are an existing NPS subscriber) or ‘Register for UPS’ (if you are a new joiner).
Step 3. Fill in the details as requested.
Step 4. Upload any required documents and submit the form.
Offline route
Step 1. Download and complete the relevant form:
- Form A1 (new recruits)
- Form A2 (existing NPS member opting for UPS)
- Form B1 (if you were an NPS subscriber and retired on or after 1 April 2025)
- Form B2 (if you retired before 31 March 2025)
- Form B5 or B6 (for spouses of retirees).
Step 2. Fill out and submit the completed form to your DDO (Drawing & Disbursing Officer). The DDO verifies details and forwards the form to the PAO (Pay & Accounts Officer),
Important: If you are switching from NPS, exercise your option by the deadline (check the current cut-off). If you need, ask your DDO/HR for help with the correct form and supporting documents.
How to Maximise Benefits with UPS
Integrating the UPS with existing pension plans can help individuals better gauge their post-retirement financial requirements. By considering both the UPS and other investment avenues, retirees can create a comprehensive portfolio that ensures income stability.
Step 1. Using a Retirement Planning Calculator
A retirement planning calculator is an essential tool for estimating future income needs. By inputting factors such as expected retirement age, current savings, and planned investments, individuals can get a clearer picture of how the UPS will complement their overall retirement strategy. Using this tool in addition to a pension calculator can make your retirement planning even more accurate and efficient.
Step 2. Diversification through Pension Plans
While UPS offers an assured pension, retirees should also explore other investment vehicles. For example, combining a life insurance plan with traditional pension schemes ensures individuals receive lump sum payouts for emergencies or for leaving a legacy. Compare pension plan options that offer financial protection features to ensure a comprehensive portfolio.
Step 3. Long-Term Growth of Savings
Investing in pension plans early ensures the compounding effect on your savings is maximised. Adding UPS as a cornerstone in your retirement strategy can safeguard against market volatility, ensuring your savings last throughout your retirement.
Using a retirement planning calculator can help individuals tailor their financial plans around UPS and other pension products. Integrating life insurance plans with retirement savings ensures retirees can manage both day-to-day expenses and larger financial needs.
In summary, the Unified Pension Scheme offers comprehensive protection, flexibility, and inflation-adjusted benefits, making it a valuable option for retirement. It serves as a robust backbone for individuals preparing for post-retirement life, and when combined with other retirement plans, it ensures a comfortable and financially stable retirement.
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