This article goes through the 194-page gazette notification to prepare a list of key points, FAQs and an updated calculator for UPS subscribers.
On 19th March 2025, there a Gazette Notification was issued titled: “PENSION FUND REGULATORY AND DEVELOPMENT AUTHORITY (OPERATIONALISATION OF UNIFIED PENSION SCHEME UNDER NATIONAL PENSION SYSTEM) REGULATIONS, 2025”.
In this notification, the Pension Fund Regulatory and Development Authority (PFRDA) has notified the final rules for UPS which we have collated in this article including the UPS pension calculator and Frequently asked questions (FAQs).
Related:
Calculator: UPS vs. NPS - which is better?
The Unified Pension Scheme (UPS) was announced on 25th August 2024 to “improve the National Pension System (NPS) for Central Government employees.” UPS offers:
The last point, since UPS is opt-in while NPS is mandatory, requires some calculation to determine if UPS is better than NPS.
Reading the 194 page UPS notification highlights the following points that subscribers must keep in mind.
Only certain Central Government employees are eligible for UPS. Employees working on April 1, 2025, and already in the National Pension System (NPS) need to submit an application in Form A2 to their Drawing and Disbursing Officer (DDO) before the option selection period ends. New recruits on or after April 1, 2025, will use Form A1. The choice of opting for UPS is final and irrevocable.
The monthly contribution from a UPS subscriber is 10% of their basic pay (including non-practicing allowance, if applicable) and dearness allowance. Both the employee’s and the Central Government’s matching contributions are to be sent to the Trustee Bank through an authorized bank by the last working day of each month, except for March’s contribution, which is to be sent by the first working day of April.
The Central Recordkeeping Agency (CRA) will calculate a Benchmark Corpus for every employee who opts for UPS. This calculation assumes regular and timely receipt of both employer and employee contributions. It’s based on the Net Asset Value (NAV) of the default investment pattern. Importantly, partial withdrawals and voluntary contributions are not considered in the computation of the Benchmark Corpus. Missing contributions will be valued based on the weighted average NAV of the default pattern on the last working day of the month the contribution was due.
Upon superannuation, voluntary retirement (after 25 years of qualifying service), or retirement under Fundamental Rule 56(j), eligible UPS subscribers can receive a lump sum payment equivalent to one-tenth of their last drawn basic pay and dearness allowance. This is in addition to the assured payout.
The Assured Payout is calculated as 50% of the average basic pay of the last twelve months multiplied by the ratio of qualifying service months to 300. However, this payout is subject to a minimum qualifying service of 25 years (300 months); if the qualifying service is less than 120 months, UPS is not applicable. Also, the assured payout can be proportionately reduced if the individual corpus is less than the benchmark corpus or if the subscriber opts for a final withdrawal of up to 60% of their individual or benchmark corpus (whichever is lower).
While subscribers can withdraw up to 60% of their individual or benchmark corpus at retirement, it’s important to note that this final withdrawal will proportionately reduce the assured payout. If the individual corpus exceeds the benchmark corpus, the final withdrawal is calculated on the benchmark corpus, and the excess is paid separately.
Generally, the period from when an employee was eligible for NPS in the Central Government is considered qualifying service. However, periods spent on deputation or foreign service where applicable contributions were not received are generally not included. Suspension periods are also not counted unless specifically declared by the competent authority. Certain types of extraordinary leave might not count towards qualifying service unless the appointing authority permits it at the time of granting the leave, with a specific entry in the service book.
For employees who retired on or before March 31, 2025, and opt for UPS, a monthly top-up amount may be payable. This is calculated as the difference between the admissible payout (plus dearness relief) and a representative annuity amount derived from their individual corpus.
Dearness Relief, as declared by the Central Government, will be payable on the admissible payout and family payout, but only after the admissible payout commences.
Various forms (A1, A2, B1, B2, B3, B4, B5, B6) are prescribed for opting into UPS and claiming benefits, depending on the employee’s status (new recruit, existing NPS subscriber, retired before/after a specific date, or deceased). Each form requires specific details and attachments.
You can use this calculator to find out.
For the FAQs below, please use the Find feature of your browser to look for specific questions and answers.
The option to avail benefits under UPS is available to employees of the Central Government who are covered under the National Pension System (NPS). Specifically, it applies to those in service on or before 31st March 2025, new recruits joining on or after 1st April 2025, and the legally wedded spouse in case of a subscriber who has superannuated or retired and passed away before exercising the option. However, employees removed or dismissed from service or who have resigned are not eligible.
Central Government employees in service as of April 1, 2025, and subscribed to NPS, need to submit an application to their concerned Drawing and Disbursing Officer (DDO) in Form A2 of Schedule I. New recruits joining on or after April 1, 2025, will submit an application in Form A1 of Schedule I. Eligible employees who superannuated or retired on or before March 31, 2025, and were under NPS, should submit Form B2 of Schedule I along with KYC documents to their DDO. In case of a deceased eligible employee who retired on or before March 31, 2025, their legally wedded spouse should submit Form B6 of Schedule I with KYC documents. These forms can be submitted online through the CRA portal or physically to the Head of Office or DDO. The option once exercised is final and irrevocable.
The monthly contribution from the UPS Subscriber will be ten percent of their basic pay (including non-practicing allowance, where applicable) and dearness allowance. The Central Government will also contribute an equal matching amount to the individual Permanent Retirement Account Number (PRAN) of the UPS subscriber. Additionally, there will be an additional Central Government contribution at an estimated eight and a half percent of basic pay and dearness allowance into a Pool Corpus.
The contributions will be invested and managed by pension funds with the objective of optimizing returns while ensuring safety. UPS Subscribers have an option to choose their pension fund and investment pattern, including a default pattern determined by the Authority. They can choose any one of the pension funds registered with the Authority.
Investment choices include investing hundred percent in Government securities (Scheme G) or opting for one of the Life Cycle based schemes (Conservative LC-25 or Moderate LC-50). Subscribers can change their pension fund choice once and investment choice twice in a financial year. If no choice is made, the default pattern will apply.
For each employee under UPS, the CRA will compute a Benchmark Corpus for comparison with their individual corpus. This is based on the assumptions of regular contributions invested as per the default pattern, and no partial withdrawals. It serves as a benchmark to determine if the individual’s investment choices have performed better or worse than the default option.
Upon superannuation after at least ten years of qualifying service, voluntary retirement after 25 years, or retirement under Fundamental Rule 56(j), a UPS subscriber is eligible for benefits. These include a lumpsum payment equivalent to one-tenth of the last drawn basic pay and dearness allowance. They will also receive an assured payout, which is 50% of the average of the last twelve months’ basic pay, subject to a minimum of 25 years of qualifying service (300 months). There’s also a minimum guaranteed payout of Rupees Ten Thousand per month if the qualifying service is at least ten years. The actual monthly payout might be an admissible payout, which could be reduced if the individual corpus is less than the benchmark corpus or if a final withdrawal is made.
If a Central Government employee takes voluntary retirement after a minimum qualifying service period of twenty-five years, they are still eligible for UPS benefits. The admissible payout will commence from the date they would have superannuated if they had continued in service.
Upon the death of a UPS Subscriber who was receiving admissible payout, their legally wedded spouse will receive a family payout for life, which is sixty percent of the admissible payout the subscriber was drawing immediately before their death. In case of a deceased Central Government employee under NPS who retired on or before 31st March 2025 and was eligible for UPS, the spouse will receive a family payout.
Yes, a UPS Subscriber is eligible to make partial withdrawals from their individual corpus under the UPS PRAN after a lock-in period of three years from the date of enrolment under UPS or NPS (whichever is earlier). These withdrawals are limited to a maximum of three times during the entire tenure under UPS and cannot exceed twenty-five percent of the subscriber’s own contributions. The document specifies certain conditions under which partial withdrawals are permitted, such as for children’s higher education or marriage, purchase or construction of a first house, treatment of illnesses, disability expenses, and skill development.
The assured payout is calculated using the formula: (½ of P) x (Q/300), where P is the average basic pay of the last twelve months, and Q is the months of qualifying service (capped at 300). However, if Q is less than 120 months, UPS is not applicable. There is a minimum guaranteed payout of Rupees Ten Thousand per month if the qualifying service is ten years or more and the calculated assured payout is less than this amount. The final admissible payout might be adjusted based on the comparison of the individual corpus with the benchmark corpus and any final withdrawal opted for.
UPS is presented as an option under the National Pension System (NPS) specifically for Central Government employees covered under NPS. It introduces the concept of an assured payout and a benchmark corpus, which are not part of the standard NPS. It also involves a Pool Corpus funded by an additional government contribution.
The Central Recordkeeping Agency (CRA) plays a crucial role in operationalizing UPS, including enrolment, enabling choices, providing systems, calculating the benchmark corpus, recordkeeping, and authenticating partial withdrawals. The National Pension System Trust is responsible for authorizing the release of UPS benefits, monthly payouts from the Pool Corpus, and dearness relief. Other intermediaries like Pension Funds, Trustee Bank, and Custodian of Securities also have defined roles.
If the individual corpus is less than the benchmark corpus, the admissible payout will be proportionately reduced. However, the UPS Subscriber has the choice to replenish the shortfall at any point before or on retirement. If the shortfall is not replenished, the subscriber will receive a proportionately reduced payout.
Opting for a final withdrawal (up to 60% of the individual or benchmark corpus, whichever is lower) will proportionately reduce the assured payout payable to the UPS Subscriber.
Dearness Relief (DR), as declared by the Central Government from time to time, will be payable on the admissible payout and family payout. However, it will only be payable once the admissible payout commences.
Published: 22 March 2025
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This post titled Which are the important points regarding Unified Pension Scheme that you must keep in mind as per the final March 2025 gazette notification? first appeared on 24 Mar 2025 at https://arthgyaan.com
