Unified Pension Scheme Rules Notified: New Pension Option from April 1

Detailed Regulations Released by PFRDA to Guide UPS Implementation for Central Government Employees

The Pension Fund Regulatory and Development Authority (PFRDA) has formally notified the Regulations for Operationalisation of the Unified Pension Scheme (UPS), 2025, setting the stage for a major shift in retirement benefits for central government employees. These regulations, published in the Gazette of India on March 19, provide the much-awaited procedural and structural framework for implementing the UPS from April 1, 2025.

Who Can Opt for UPS?

The UPS offers a new pension choice for central government employees currently under the National Pension System (NPS). The eligibility includes:

All existing central government employees under NPS as of April 1, 2025.
All new entrants to central government service on or after that date.
Retired or voluntarily retired employees (under NPS) who exited service on or before March 31, 2025.
Legally wedded spouses of such employees who passed away before exercising the UPS option.

Eligible employees must exercise their choice within three months of April 1, 2025. New recruits have 30 days from joining to opt in. Once exercised, the option is final and irrevocable.

Key Features of the Unified Pension Scheme

1. Hybrid Structure of Contributions

Employees contribute 10% of basic pay and dearness allowance (DA).
The government matches with an equal 10% contribution to the individual account.
An additional 8.5% contribution by the government goes to a pooled corpus to ensure guaranteed benefits.

2. Guaranteed Minimum Pension

Employees with at least 25 years of qualifying service will receive 50% of the average basic pay (of last 12 months) as monthly pension.
Minimum guaranteed pension of ₹10,000 per month for those with at least 10 years of service.
Proportional benefits for those between 10 and 25 years of service.

3. Lump Sum Retirement Benefit

A lump sum equal to 10% of basic pay + DA per completed six months of service is payable on retirement.
This is in addition to the monthly pension.

How the Investment Works

Individual vs Pooled Corpus

Each UPS subscriber will have a personal corpus and be allowed to choose a pension fund and investment pattern, or accept a default lifecycle fund.
The government-managed pooled corpus ensures stable returns for guaranteed payments.

Returns and Benchmarks

A “Benchmark Corpus” is calculated for each subscriber based on a default investment strategy.
At retirement, the subscriber’s actual corpus is compared to this benchmark:
- If higher, the surplus is paid out.
- If lower, the guaranteed benefit is adjusted accordingly, unless the shortfall is made up voluntarily.

Partial Withdrawal Rules

Subscribers can withdraw up to 25% of self-contributions (excluding returns) for:

Higher education or marriage of self/children,
Purchase or construction of a house (if not already owned),
Serious illness of self or family,
Disability-related needs, or
Skill development expenses.

Maximum of three partial withdrawals are allowed, including any done under NPS.

Family Pension Provisions

In case of a subscriber’s death:

The legally wedded spouse receives 60% of the last drawn pension.
Arrears and other benefits including DA and lump sum (if applicable) are also payable to the spouse.

Transition from NPS and Claim Process

Retired employees under NPS who opt for UPS will receive:

Lump sum payment
Monthly top-up (difference between UPS pension and NPS annuity)
Applicable DA
Arrears with PPF-based interest for delays up to the form submission date.

UPS claim forms (Form B1 to B6) and PRAN management are handled via CRA portal or physically through the DDO.

Safeguards and Oversight

PFRDA ensures robust governance and audit through designated pension funds, the CRA, and custodians.
Provisions are in place for dispute resolution, data security, and penal actions for intermediary failures.

What’s Next for Employees?

Offices are directed to prepare a list of employees retiring in the next 12 months every quarter and ensure the process of UPS option and benefit calculation is completed timely.

Employees are strongly advised to consult their DDOs and study the new scheme thoroughly before making an irreversible decision.

See original Gazette Notification: