The Unified Pension Scheme (UPS) is an option within the National Pension System for central government employees, in force from 1 April 2025. It assures a pension of 50% of the average basic pay of the last 12 months for those with 25 years of service, a minimum of Rs 10,000 a month after 10 years, a family pension of 60%, dearness relief, and a lump sum at retirement. The window for existing employees to opt for UPS closed on 30 November 2025.
For two decades, central government employees who joined after 1 January 2004 were covered only by the market-linked National Pension System (NPS). Many demanded a return to the old pension scheme with its assured payout. The Unified Pension Scheme is the government’s middle path: employees still contribute, but the pension is assured. It was approved by the Cabinet in August 2024 and came into force on 1 April 2025.
UPS at a glance
| Feature | Details |
|---|---|
| Who it covers | Central government employees under NPS who opt for it, and new recruits who choose it |
| In force from | 1 April 2025 |
| Assured pension | 50% of average basic pay of the last 12 months, for 25 years or more of service |
| Shorter service | Proportionate pension for 10 to 25 years of service |
| Minimum pension | Rs 10,000 a month for at least 10 years of service |
| Family pension | 60% of the pension being drawn, to the spouse |
| Inflation protection | Dearness relief on pension, linked to AICPI-IW like serving employees’ DA |
| Lump sum at retirement | One-tenth of monthly pay plus DA for every completed six months of service |
| Employee contribution | 10% of basic pay plus DA |
| Government contribution | 18.5% of basic pay plus DA |
How the contributions work
The employee puts in 10% of basic pay plus DA, the same as under NPS. The government contributes 18.5%: 10% goes into the employee’s individual corpus and 8.5% into a pooled corpus that helps fund the assured payout. At retirement, the assured pension is paid in return for the individual corpus being handed over. If the individual corpus has grown more than the benchmark, the employee is not worse off; if it has done worse, the assurance protects the pension.
Worked example
Suppose an employee retires after 30 years with an average basic pay of Rs 1,00,000 in the last 12 months and a last drawn pay plus DA of Rs 1,60,000.
- Monthly pension: 50% of Rs 1,00,000 = Rs 50,000, plus dearness relief as it is announced.
- Lump sum: 30 years is 60 six-month periods. One-tenth of Rs 1,60,000 is Rs 16,000. Rs 16,000 x 60 = Rs 9.6 lakh. This is on top of gratuity.
- Family pension after the retiree’s death: 60% of Rs 50,000 = Rs 30,000 plus dearness relief.
An employee with 15 years of service would get a proportionate pension of 15/25 of the full amount, and never less than Rs 10,000.
UPS vs NPS vs old pension scheme
| Point | Old pension scheme | NPS | UPS |
|---|---|---|---|
| Employee contribution | None | 10% | 10% |
| Government contribution | None (paid from budget) | 14% | 18.5% |
| Pension amount | 50% of last pay, assured | Depends on market returns and annuity | 50% of last-12-month average, assured |
| Inflation protection | Yes, DR | No, annuity is usually fixed | Yes, DR |
| Lump sum | Commutation of pension | Up to 60% of corpus, tax-free | Fixed formula, plus gratuity |
| Market risk | None | On employee | Mostly on government |
Who gains more from UPS
- Employees with long service (25 years or more) and a steady pay path usually gain from the assured, inflation-linked pension.
- Employees who joined late, expect short service, or want a larger lump sum may be better off in NPS, where up to 60% of the corpus can be withdrawn tax-free and there is no assured-payout trade-off.
- Those who retire voluntarily get UPS pension only from the date they would have reached normal superannuation.
The switch window and switching back
Existing NPS employees and eligible retirees had to choose UPS through the CRA portal or a physical form. The deadline, first set for 30 June 2025, was extended to 30 September and then 30 November 2025, and the window has closed. Those who did not opt remain in NPS. Employees who opted for UPS have a one-time, one-way option to move back to NPS, up to one year before superannuation or three months before voluntary retirement. New central government recruits choose between UPS and NPS within a set period of joining.
Separate UPS rules for railway employees were notified in September 2026. Several states have also announced their own UPS-style schemes for state employees.
Tax treatment
The government has extended the tax benefits available under NPS to UPS, including the deduction for employee contributions and the tax treatment of the employer contribution. Monthly pension is taxable as salary income, with the standard deduction available. Check our income tax slab guide for current rates.
UPS and the 8th Pay Commission
The 8th Central Pay Commission has been asked to consider the cost of pension schemes. Its report could affect pay-linked pension calculations for UPS members. Read our 8th Pay Commission explainer and our guide to dearness allowance.
Sources
- Cabinet decision approving the Unified Pension Scheme, August 2024 (PIB)
- PFRDA (Operationalisation of Unified Pension Scheme under NPS) Regulations, 2025, and PFRDA UPS page (pfrda.org.in)
- Department of Financial Services notifications extending the option window, 2025
Last updated: 26 September 2026.
Frequently asked questions
What is the Unified Pension Scheme?
An option under NPS for central government employees, in force from 1 April 2025, that assures a pension of 50% of the average basic pay of the last 12 months after 25 years of service, with a Rs 10,000 minimum after 10 years and a 60% family pension.
Can I still switch from NPS to UPS?
No, not as an existing employee. The option window closed on 30 November 2025. New recruits get a choice within a set period after joining.
How much do employees contribute under UPS?
Employees contribute 10% of basic pay plus DA. The government contributes 18.5%.
Is UPS pension linked to inflation?
Yes. Dearness relief is paid on the assured pension and family pension, linked to the All India Consumer Price Index for Industrial Workers.
How is the UPS lump sum calculated?
One-tenth of monthly pay plus DA at retirement for every completed six months of qualifying service. It is paid in addition to gratuity.