Unified Pension Scheme 2025: Your Guide

On March 19, 2025, the Pension Fund Regulatory and Development Authority (PFRDA) launched the Unified Pension Scheme (UPS). It’s in the Gazette of India. It starts April 1, 2025. This blends security of a guaranteed pension with growth from the National Pension System (NPS).

New recruit or nearing retirement? UPS offers assured payouts, lumpsum benefits, and family support. Confused by jargon? Curious about details? This FAQ breaks down the notification into simple answers. Here’s everything you need about UPS!

FAQ: Everything You Need to Know About the Unified Pension Scheme (UPS)

1. What is the Unified Pension Scheme (UPS)?

The UPS is a hybrid pension option introduced under the National Pension System (NPS) by the PFRDA. Notified on March 19, 2025, and kicking off on April 1, 2025, it’s designed to give Central Government employees a secure retirement plan. It offers a minimum monthly pension (at least Rs. 10,000), a lumpsum payment at retirement, and a family pension for your spouse if you pass away—all while letting your contributions grow through NPS investments.

2. Why was the UPS introduced?

The Central Government wanted to give NPS subscribers an alternative that combines the predictability of a traditional pension with the flexibility of market-linked returns. It’s a response to employees’ needs for financial security in retirement, ensuring a baseline income while still allowing investment choices.

3. Who can join the UPS?

You’re eligible if you’re in one of these groups:

Current Employees: Central Government employees under NPS as of April 1, 2025.
New Recruits: Those joining Central Government service on or after April 1, 2025.
Retirees by March 31, 2025: Employees who superannuated, took voluntary retirement, or retired under Fundamental Rule 56(a) (not as a penalty) by March 31, 2025—or their legally wedded spouse if the employee has passed away.
Exclusions: If you were dismissed, removed, or resigned voluntarily, UPS benefits don’t apply.

4. How do I sign up for the UPS?

Here’s how to opt in, depending on your situation:

Existing Employees (as of April 1, 2025): Use Form A1 (for current NPS subscribers) or A2 (if applicable) and submit it to your Drawing and Disbursing Officer (DDO) within three months—by June 30, 2025—unless the government extends the deadline.
New Recruits: Submit Form A2 within three months of joining service.
Retirees (by March 31, 2025): Use Form B2 with KYC documents via your DDO.
Spouse of Deceased Employee: Use Form B3 if your spouse retired or died by March 31, 2025, and was under NPS.

You can submit online via the Central Recordkeeping Agency (CRA) portal or physically to your office head/DDO. The CRA issues an acknowledgment for online submissions, and your DDO verifies details before forwarding to the Pay and Accounts Officer (PAO) for approval. Once you choose UPS, it’s final and irreversible.

5. What happens if I miss the deadline to opt in?

If you’re eligible but don’t opt for UPS by the deadline (June 30, 2025, for existing employees, or three months from joining for new recruits), you’ll stay under the regular NPS without UPS benefits.

6. What’s my Permanent Retirement Account Number (PRAN) under UPS?

Existing NPS Subscribers: Your current PRAN gets linked to UPS after opting in.
New Recruits: You’ll get a new PRAN tied to UPS once enrolled.
Retirees: Your old NPS PRAN is reused for UPS benefits.

The CRA manages your PRAN, transferring your existing NPS corpus to UPS if applicable.

7. How much do I contribute to the UPS?

You contribute 10% of your monthly basic pay (including non-practicing allowance, if applicable) plus Dearness Allowance (DA). The Central Government matches this with an equal 10% contribution, doubling the amount going into your PRAN each month. For example, if your basic pay + DA is Rs. 50,000, you and the government each contribute Rs. 5,000, totaling Rs. 10,000 monthly.

8. How are contributions processed?

Your office deducts your share from your salary by the 20th of each month. The DDO sends details to the PAO or Cheque Drawing and Disbursing Officer (CDDO), who prepares a Subscriber Contribution File (SCF) by the 25th. Both contributions (yours and the government’s) are deposited into the Trustee Bank via a recognized bank by the last working day of the month—except for March, which shifts to April’s first working day.

9. What’s the “Individual Corpus” and “Benchmark Corpus”?

Individual Corpus (IC): The total value of your contributions plus investment returns in your PRAN. It reflects your actual savings.
Benchmark Corpus (BC): A hypothetical amount calculated by the CRA, assuming regular, timely contributions (from you and the government) invested in a default pattern set by PFRDA, with no partial withdrawals or voluntary contributions before April 1, 2025.

The IC and BC are compared at retirement. If IC exceeds BC, you get the surplus after exiting. If IC is less, you might need to cover the shortfall to get the full pension—or accept a reduced payout.

10. How is the Benchmark Corpus calculated?

The BC assumes:

Monthly contributions from your NPS/UPS start date.
Investment in the default pattern (e.g., a mix of government securities and equities).
No partial withdrawals or extra contributions before April 1, 2025.
For pre-April 2025 contributions, actual receipt dates are used; post-April 1, contributions are assumed received mid-month.

It’s valued using the Net Asset Value (NAV) of the default pattern, weighted across pension funds if multiple manage it. The formula involves complex math (e.g., weighted average NAV), but the CRA handles this and updates your PRAN monthly.

11. What benefits does UPS offer?

Here’s the full breakdown:

Lumpsum Payment: At retirement, you get (Last Month’s Basic Pay + DA) ÷ 10 × (Qualifying Service Months ÷ 6). E.g., Rs. 83,616 last pay and 191 months = 31 six-month periods, so Rs. 2,59,210.
Assured Payout: Half your 12-month average basic pay × (Qualifying Service Months ÷ 300), with a minimum of Rs. 10,000. E.g., Rs. 52,894 average pay and 191 months = Rs. 16,838.
Admissible Payout: Adjusted as Assured Payout × (IC/BC) × (1 – Final Withdrawal %). E.g., Rs. 16,838 with IC Rs. 27,43,000, BC Rs. 29,38,130, and 60% withdrawal = Rs. 6,288.
Dearness Relief (DR): Added to your admissible payout, based on government rates (e.g., 56% in May 2025 adds Rs. 3,522 to Rs. 6,288, totaling Rs. 9,810 monthly).
Family Pension: If you die, your legally wedded spouse (listed in service records at retirement) gets 60% of your admissible payout + DR until their death or remarriage. E.g., Rs. 15,720 becomes Rs. 9,432 + Rs. 5,282 = Rs. 14,714.

12. What’s “Qualifying Service” and how is it calculated?

Qualifying Service (QS) is the time you’ve served that counts toward UPS benefits. You need at least 10 years (120 months) for full benefits. It’s calculated as:

Start Date: When you joined under NPS (for existing employees) or UPS (for new recruits).
End Date: Superannuation, voluntary retirement, or retirement under Fundamental Rule 56(a).
Inclusions: Full service periods, including approved leaves or suspensions if your Head of Office (HOO) counts them.
Exclusions: Unauthorized absences (unless condoned), unpaid extraordinary leave (unless approved), and pre-NPS/UPS service. E.g., 194 months total service minus 24 months deputation and 106 months unauthorized absence = 63 months (less than 120, so no benefits).

Your HOO certifies your QS at retirement.

13. Can I withdraw money from UPS?

Yes, at retirement, you can withdraw up to 60% of your Individual Corpus as a final withdrawal. The rest funds your pension. Examples:

No withdrawal: Rs. 22,500 monthly.
60% withdrawal: Rs. 9,000 monthly.
40% withdrawal: Rs. 13,500 monthly. Partial withdrawals during service (e.g., Rs. 1,15,000) don’t affect QS but adjust your IC and BC calculations.

14. What investment options do I have under UPS?

You can choose:

Pension Fund: Any PFRDA-registered fund (e.g., LIC Pension Fund, SBI Pension Fund).
Investment Pattern:
- 100% in government securities (Scheme G).
- Lifecycle funds: LC-25 (up to 25% equity) or LC-50 (up to 50% equity).
Default Option: If you don’t choose, your contributions go into a PFRDA-set default pattern (typically balanced).

You can switch funds once a year and investment patterns twice per financial year. Funds must share past performance data to help you decide.

15. What if my Individual Corpus is less than the Benchmark Corpus?

If your IC falls short (e.g., due to poor investment choices), you’re responsible for the difference:

Pay the shortfall before retirement to get the full assured payout.
If unpaid, your admissible payout drops proportionally. E.g., IC Rs. 27,43,000 vs. BC Rs. 29,38,130 reduces Rs. 16,838 to Rs. 15,720 before withdrawal adjustments.

16. What if my Individual Corpus exceeds the Benchmark Corpus?

Any surplus (IC > BC) is credited to your PRAN after retirement, payable as an extra benefit. E.g., IC Rs. 10,00,000 vs. BC Rs. 9,02,792 means Rs. 97,208 extra, though excess isn’t factored into monthly payouts unless specified.

17. What happens if I retire before March 31, 2025?

If you retired by March 31, 2025, and opt for UPS:

Lumpsum Payment: Same formula as above (e.g., Rs. 51,816 for Rs. 25,908 last pay and 20 six-month periods).
Admissible Payout: Adjusted for past NPS withdrawals (e.g., Rs. 3,541 with 60% withdrawal).
Top-Up Amount: Bridges the gap between your current NPS annuity and UPS payout. E.g., Rs. 8,00,000 corpus, 60% withdrawn, 8.30% annuity rate gives Rs. 2,214 annuity; UPS adds Rs. 1,398 monthly top-up.
Arrears: Lumpsum and top-up arrears from retirement to claim date earn simple interest at the PPF rate.

18. What happens if I die after joining UPS?

Before Retirement: Your Individual Corpus goes to your nominee under NPS rules; UPS benefits don’t apply.
After Retirement: Your spouse gets a family pension (60% of admissible payout + DR). E.g., Rs. 15,720 payout becomes Rs. 14,714 monthly for the spouse (with 56% DR).

19. Can my family pension stop?

Yes, it stops if your spouse remarries or passes away. It’s only for the legally wedded spouse listed in your service records at retirement.

20. What if I leave service early?

If you’re dismissed, removed, or resign voluntarily, UPS benefits are forfeited. You revert to standard NPS rules, withdrawing your corpus per NPS guidelines.

21. How do I track my UPS details?

The CRA updates your PRAN monthly with:

Individual Corpus value.
Benchmark Corpus value.
Units and NAV details. Access this via the CRA portal or your office’s payroll system.

22. What’s the role of pension funds in UPS?

Pension funds manage your contributions, invest them per your choice (or default pattern), and report performance. They’re accountable to PFRDA and must ensure transparency.

23. How does UPS handle past NPS contributions?

Pre-April 1, 2025: Contributions are valued as received, impacting your IC and BC.
Post-April 1, 2025: First UPS contribution starts the month after opting in (e.g., May 2025 if you opt in April).

24. Are there any minimum payout guarantees?

Yes, the assured payout is at least Rs. 10,000 monthly, even if your calculated amount (half average pay × QS/300) is lower. E.g., Rs. 5,177 becomes Rs. 10,000.

25. How does Dearness Relief work?

DR is a percentage (set by the government, e.g., 56% in May 2025) applied to your admissible payout to offset inflation. It adjusts periodically and applies to family pensions too.

26. Can I keep contributing to NPS alongside UPS?

Yes, you can voluntarily maintain NPS Tier I or Tier II accounts for extra savings, but these don’t affect UPS benefits.

27. What’s the UPS Payment Order?

At retirement, your PAO issues a payment order to the NPS Trust with your details (PRAN, QS, payout calculations), triggering benefit disbursal.

28. Where can I see examples of UPS calculations?

The notification’s Schedules V and VII offer scenarios:

Active Employee: Rs. 52,894 average pay, 191 months QS, 60% withdrawal = Rs. 9,810 monthly.
Retiree: Rs. 25,250 average pay, 123 months QS, 60% withdrawal = Rs. 1,398 top-up over Rs. 2,214 annuity.

Final Thoughts

Whether you’re planning decades ahead or catching up post-retirement, UPS ensures a minimum Rs. 10,000 monthly payout, family support, and investment control. Opt in by June 30, 2025 (or within three months of joining), and check your PRAN regularly via the CRA portal. This comprehensive guide is your go-to resource—bookmark it, share it, and secure your future with UPS!