Business: Everyone needs financial security after retirement. National Pension System (NPS) is already available for government employees. The government has recently launched a new pension scheme, Unified Pension Scheme (UPS), to provide guaranteed pension to employees.

The government claims that this is a better alternative to the earlier NPS. In this, like the old pension scheme, the benefit of assured pension is available. Still the employees are reluctant. 30 September 2025 was the last day to choose UPS. Till then only about 1 lakh out of 24 lakh central employees opted for it.

Even after many changes, employees are confused about UPS. The government is also giving opportunities to the employees to think. The date for selection of UPS has been extended for the third time. Employees can now opt for it till November 30.

Advantages of UPS

• Minimum pension of Rs 10,000/month on 10 years of service.
• Dearness relief (like DA) on assured payment, family payment to partner on death at the rate of 60%.
• Additional lump sum amount linked to benefits/service tenure, which is separate from the assured payment.
• One-time, one-way switch facility from UPS to NPS up to one year before retirement.
• Excess contribution: 10% (employees) 10% (government) 8.5% (pooled corporations)
• Tax incentives on investments, returns and withdrawals.

there are some disadvantages too

• Assured Payments are subject to the Terms of Service.
• Voluntary Retirement Rules may change the date of commencement of payments.
• Ineligible for pension by resignation or dismissal.
• If your chosen investment underperforms the benchmark corpus (BC), you may need to make up the difference.
• Employees will have control over individual corpus, the government will have complete control over the pool corpus.
• Lump sum withdrawal facility up to maximum 60 per cent, but no clarity on tax exemption.

Benefits of NPS

• Complete freedom to choose equity and debt.
• Easy portability when changing job or sector. NPS applicable in most places.
• Potential for larger corpus in the lunch period through equities and bonds. Facility to choose from multiple options.
• A maximum of 60% of the amount can be withdrawn in lump sum, which is tax free.
• Tax incentives on investments, returns and withdrawals.
• 24 hour online monitoring of NPS accounts.

what is the shortage

• Dearness relief not included, no guarantee of pension. Retirement Income Market Performance, Contribution and
• Dependent on the annuity rate at exit.
• Contribution lower than UPS: 10% (Employee) +14% (Govt.).
• Family benefits depend on annuity.
• A poor choice or wrong change in asset-mix can harm compounding gains.
• The pension will be based on the prevailing annuity build, which may fluctuate.

What are IC, BC in UPS?
IC Individual Corpus: This is the individual corpus of the pensioner. This includes the monthly contributions of the pension holder and the government, and interest returns from investments. This corpus represents the total corpus of pensioner’s pension at the time of retirement.

BC: Benchmark Corpus: This is the benchmark corpus. Pension fund regulator PFRDA calculates this based on the default investment pattern (e.g. 15% equity, 85% bonds). If the pensioner contributes regularly, then IC and BC become equal. If the collection of IC is less than BC, then there is reduction in pension.

Expert said… Since regular income is required to meet monthly expenses after retirement. Hence UPS is a better product, which provides pre-estimated and minimum assured pension every month. If an employee is willing to take the risk or there are other funds available to meet their shortfall, such employees can continue in NPS. Balwant Jain, Tax and Investment Expert