The Ministry of Finance on Monday extended the deadline to decide between the Unified Pension Scheme (UPS) and the National Pension System (NPS) till September 30.
Earlier, the deadline was June 30. The deadline has been extended by three months to provide more time to central government employees to decide whether they want to switch to the UPS or stay with the NPS.
As per the regulations, eligible existing employees, past retirees, and the legally wedded spouses of deceased past retirees were given a period of three months i.e., up to 30th June to exercise their option under the scheme.
Notably, the UPS, often associated with the old pension system (OPS), is a defined benefit scheme that promises a fixed monthly pension after retirement. Typically, this pension amounts to 50% of the last drawn salary and is directly funded by the government, without requiring any contribution from the employee.
One of its most attractive features is the inclusion of Dearness Allowance (DA), which is periodically revised to keep pace with inflation. The UPS ensures financial certainty for retirees, as the pension amount is pre-determined and immune to market fluctuations.
The NPS is a defined contribution plan introduced in 2004 for new central government employees (except the armed forces) and later extended to state government and private sector employees.
Under this system, both the employee and the government contribute a fixed percentage of the employee’s basic salary plus dearness allowance—typically 10% each for state employees and up to 14% from the central government.
These contributions are invested in a mix of equity, corporate bonds, and government securities, depending on the employee’s chosen investment mix. Upon retirement, the employee can withdraw 60% of the accumulated corpus as a lump sum (tax-free), while the remaining 40% must be used to purchase an annuity, which provides a regular pension.