Pension rules, charges and 2026 changes
Unified Pension Scheme (UPS) explained — assured payout, ₹10,000 minimum, lump sum and NPS switch
How the Unified Pension Scheme for central government employees works since 1 April 2025: payout formula, contributions, family pension, lump sum and the one-way switch to NPS.
The Unified Pension Scheme (UPS) is an option within NPS for central government employees, in force since 1 April 2025. In place of a market-linked corpus and an annuity, it promises an assured payout of 50% of the average basic pay of the last 12 months before retirement for employees with 25 or more years of qualifying service, a proportionately smaller payout for 10 to 25 years, and a minimum of ₹10,000 a month for anyone retiring with at least 10 years. The payout is linked to inflation through dearness relief, a family payout of 60% continues to the spouse, and a lump sum is paid at superannuation in addition to gratuity. Existing employees covered by NPS had to choose UPS by 30 November 2025 (the window had been extended twice); about 1.22 lakh had done so by that date, according to official figures reported at the time. UPS is administered by PFRDA under the Unified Pension Scheme regulations and the Department of Expenditure's notifications.
Who UPS is for
- Central government employees covered by NPS who were in service on 1 April 2025 and opted in.
- New central government entrants, who get an option within a set period after joining.
- Employees who had already retired under NPS after completing qualifying service, who could opt in for the difference (with arrears adjusted).
- State governments may adopt a similar scheme for their own staff; check your state's finance department.
UPS is not available to private-sector NPS subscribers.
Contributions
| Contributor | Share of basic pay plus DA | Where it goes |
|---|---|---|
| Employee | 10% | Individual corpus |
| Government (matching) | 10% | Individual corpus |
| Government (additional) | An estimated 8.5% (total government share 18.5%: 10% matching + 8.5% pool, per PFRDA; can vary with actuarial review) | Pool corpus that funds the assurance |
The individual corpus is still invested, by default in a pattern set for UPS or in the investment choice the employee makes. At retirement, the assured payout is funded from the individual corpus plus the pool.
The payout formula
- 25+ years of qualifying service: 50% of the average basic pay over the last 12 months before superannuation.
- 10 to 25 years: proportionate, that is, 50% × (years of service ÷ 25) of the same average.
- Minimum: ₹10,000 a month for 10+ years of service on superannuation.
- Dearness relief is added on the payout, as for central government pensioners.
Worked example (illustrative). An employee retires with 30 years of service and an average basic pay of ₹1,20,000 over the last 12 months. The assured payout is 50% × ₹1,20,000 = ₹60,000 a month, plus dearness relief. With 18 years of service and the same average, the payout would be 50% × 18/25 × ₹1,20,000 = ₹43,200 a month.
Lump sum at superannuation
In addition to gratuity, a lump sum of one-tenth of monthly emoluments (pay plus DA) for every completed six months of service is paid at superannuation, without reducing the assured payout.
Example (illustrative). With 30 years of service (60 half-years) and final pay plus DA of ₹1,80,000: 60 × ₹18,000 = ₹10,80,000.
If the value of your individual corpus at retirement is greater than the amount required to fund the benefit, the scheme's rules have provisions for how the difference is treated; check the regulations for your case.
Family payout and other exits
- Family payout: 60% of the payout the retiree was drawing, to the legally wedded spouse after the employee's death.
- Voluntary retirement after 25 years: the payout starts from the date the employee would have reached superannuation.
- Resignation, removal or dismissal: UPS assured payout is not available in cases of removal or dismissal, and different rules apply for resignation. Check the regulations.
Switching back to NPS
UPS subscribers have a one-time, one-way option to switch back to NPS during service, subject to conditions, for example before a cut-off period ahead of superannuation. The switch is not allowed after removal, dismissal or compulsory retirement as a penalty, or while disciplinary proceedings are pending or contemplated. Once you return to NPS you cannot rejoin UPS.
UPS or NPS: how to think about it
| Question | Leans UPS | Leans NPS |
|---|---|---|
| Do you value a guaranteed, inflation-linked payout? | Yes | Less important |
| Will you complete 25 years of service? | Yes | No, or uncertain |
| Do you want a large lump sum at retirement? | Less important | Yes; NPS lets government subscribers take 60% |
| Do you have other retirement income? | Little | Substantial |
| Do you want market upside? | Less | More |
For a market-linked comparison, estimate what your NPS corpus could buy using the NPS pension estimate example and the annuity pension calculator, then compare with the UPS formula above.
Related: the 2026 overview, NPS exit rules and EPS pension rules for comparison with private-sector pensions.
Frequently asked questions
Is UPS the same as the old pension scheme?
No. The old scheme was unfunded and paid 50% of last basic pay with no employee contribution. UPS requires a 10% employee contribution and bases the payout on the average of the last 12 months.
I missed the 30 November 2025 deadline. Can I still opt in?
For existing employees the window closed on that date. New entrants have their own window after joining. If you believe your option was not recorded, raise it with your department in writing.
Is the UPS payout taxable?
Pension income is generally taxable as salary income. Tax treatment of contributions and the lump sum follows notifications under the income tax law; check them before filing.
Can state government employees join UPS?
Only if their state adopts it or a similar scheme. Several states have their own pension policies.
Official sources
- PFRDA — UPS regulations, FAQs and forms
- Department of Expenditure — UPS notification and circulars
- Department of Pension and Pensioners' Welfare — pension policy for central government employees
- CPGRAMS — grievances about pension options and payments
