The Finance Ministry has announced a special provision allowing central government employees to make a one-time, one-way switch from the Unified Pension Scheme (UPS) to the National Pension System (NPS). This opportunity is available until September 30, 2025, and offers employees greater flexibility in planning their retirement corpus.
Conditions for Exercising the Switch
According to the notification, employees can exercise this option:
- Up to one year before their date of superannuation.
- In the case of voluntary retirement, at least three months before the deemed retirement date.
- In cases of resignation or other circumstances, with minor modifications as applicable.
However, this facility will not be allowed if an employee is dismissed, removed, compulsorily retired as a penalty, or facing disciplinary proceedings.
What Happens After the Switch
Once an employee opts for NPS, the provisions of the PFRDA (Exit & Withdrawal under NPS) Regulations, 2015 will come into force. This means employees will no longer be eligible for assured pension payouts and other UPS-linked benefits. Instead, they will have access to market-linked retirement savings with multiple investment choices.
Additionally, the government’s differential contribution of 4% under the default investment pattern will be credited to the employee’s NPS corpus at the time of exit, providing a boost to retirement savings.
Impact on Retirement Planning
The switch could be beneficial for employees who prefer flexibility, portability, and the possibility of higher returns offered by NPS compared to UPS. On the other hand, those seeking assured benefits and stability might prefer to continue under UPS.
The decision is irreversible, making it crucial for employees to carefully evaluate their financial goals, retirement timeline, and risk appetite before exercising this option.
Conclusion
The government’s move provides employees with an important choice in securing their post-retirement future. With the deadline of September 30, 2025, employees should review their pension preferences and take an informed decision well in advance.
