Unified Pension Scheme (UPS) Blueprint for 2025: Comprehensive Guide to Benefits, Eligibility, Payouts & Other Investment Insights

As India steadily moves towards economic inclusion and long-term social welfare, retirement planning has emerged as a crucial pillar in every working individual's life. While various pension schemes like the National Pension Scheme (NPS) and Atal Pension Yojana (APY) have been in place, the government’s recent move to launch the Unified Pension Scheme (UPS) in 2025 marks a significant shift in streamlining and simplifying the retirement ecosystem in India.

The UPS isn’t just another addition to the pension basket. It’s a well-thought-out, structured pension model designed to unify multiple existing pension schemes under a single umbrella, making it easier for the working population to plan for their golden years. It’s not merely a tool for saving — it’s a foundation to ensure financial dignity post-retirement.

This blog will discuss every aspect of the UPS—from its purpose and eligibility to the expected benefits, contribution models, payout structure, tax implications, investment options, and how it compares with existing schemes.

What is the Unified Pension Scheme?

The Unified Pension Scheme (UPS), introduced by the Central Government as an option under the National Pension System (NPS) for Central Government employees with effect from 1st April 2025, seeks to ensure financial security, stability, and dignity for government employees after retirement, safeguarding their future well-being. 

Currently, government employees are covered by the National Pension System (NPS) and can either remain with it or transition to the UPS. Once an employee selects the UPS, the choice is permanent and cannot be undone.   

While this marks a significant milestone in retirement planning, it is important to note that implementation for state government employees is still under discussion. States have the flexibility to adopt the scheme, but no formal decisions have been finalised as of now.

Unified Pension Scheme (UPS) – Key Highlights

Key Features of the Unified Pension Scheme (UPS)

Here are the top features of the UPS:

• Assured Payout Benefit: Employees enrolled in the UPS will receive a pension worth 50% of their average basic salary from the last 12 months before retirement. They must have served at least 25 years to qualify for this full amount. The pension will be scaled down proportionately for those with shorter service periods based on years worked.
• Support for Family Members: If a pensioner passes away, their family will be entitled to 60% of the pension the retiree received at the time of death, ensuring continued financial assistance.
• Minimum Payout Guarantee: Retirees who have completed a minimum of 10 years of service are promised at least ₹10,000 per month under the UPS, offering a safety net for shorter tenures.
• Adjustment for Rising Costs: Pensions, including family pensions, will be revised periodically to reflect inflation through Dearness Relief, helping maintain their real value as living expenses increase.
• Additional Lump Sum Benefit: Upon retirement, employees will receive a one-time payment alongside gratuity, calculated as 1/10th of their monthly salary (basic pay plus Dearness Allowance) for every six completed service months. This extra amount does not affect the assured pension.

Enrolment Eligibility for the Unified Pension Scheme 

This section outlines who is eligible to enrol in the Unified Pension Scheme:

• Current Central Government Employees Under NPS: Any Central Government employee enrolled in the National Pension System (NPS) and still serving as of April 1, 2025, qualifies for the UPS. These employees can choose to switch from NPS to this new scheme based on their retirement planning needs.
• New Entrants to Central Government Service: Individuals who join Central Government services on or after April 1, 2025, are eligible to opt for the UPS. Fresh recruits can select this scheme over the NPS right from the start of their careers.
• Retired NPS Subscribers from Central Government: Central Government employees previously under the NPS who have already retired—either through superannuation, voluntary retirement, or under Fundamental Rules 56(j)—by March 31, 2025, can still benefit from the UPS. This provision allows past retirees to transition and claim its advantages.
• Spouses of Deceased NPS Subscribers: The legally wedded spouse of a Central Government employee who was part of the NPS, retired or superannuated, and passed away before choosing the UPS is also eligible. This ensures surviving spouses can access the scheme’s benefits in place of the deceased subscriber.

How do I sign up for the UPS?

Here is how you can sign up for the Unified Pension Scheme:

• Current Employees (Serving as of April 1, 2025): If you’re an existing employee under the NPS, fill out Form A2 if it applies—and submit it to your Drawing and Disbursing Officer (DDO) by June 30, 2025, within the three-month window, unless the government announces an extension.
• New Employees Joining Service: For those starting Central Government service on or after April 1, 2025, complete Form A1 and submit it to your DDO within three months from your joining date to opt into the UPS.
• Retirees (Retired by March 31, 2025): If you’ve retired under NPS before March 31, 2025, use Form B2 and the required KYC documents and send them through your DDO for processing.
• Spouses of Deceased NPS Subscribers: If your spouse, an NPS subscriber, retired or passed away by March 31, 2025, submit Form B6 via the DDO to claim UPS benefits on their behalf.
• Submission Process: You can apply online through the Protean eGov Technologies Ltd. portal, which provides an acknowledgement, or you can physically hand over forms to your office head/DDO. The DDO checks your details and forwards them to the Pay and Accounts Officer (PAO) for final approval. Once you opt for UPS, the decision is permanent and cannot be changed.

Contributions Under UPS

Employee and Government Contributions under UPS

Under the Unified Pension Scheme (UPS), each employee contributes 10% of their Basic Pay and Dearness Allowance (DA), which also includes any non-practicing allowance, if applicable. The government matches this amount, effectively doubling the contribution. These combined contributions are credited directly to the employee's Permanent Retirement Account Number (PRAN), ensuring transparency and individual account tracking for every subscriber.

Pool Corpus in UPS

The Pool Corpus serves as a consolidated fund maintained under the UPS. It is primarily built from three sources. Firstly, the Government adds an additional contribution, estimated at around 8.5% of the Basic Pay and DA of all employees who have opted into the UPS. Secondly, after an employee retires (post-superannuation), their remaining balance can be transferred from their individual PRAN into this central Pool Corpus. Thirdly, the Central Government may include any other contributions as and when specified. This pooled fund helps enhance the stability and sustainability of the overall pension scheme.

Investment of Individual Corpus in UPS

Subscribers of the UPS have the flexibility to decide how their pension corpus is invested. They can choose from preset asset allocation options such as LC-25, LC-50, or the Active G 100% scheme, in line with the investment norms laid out by the regulatory authority. These options vary in risk and equity exposure, allowing individuals to align investments with their risk appetite and retirement goals. For those who do not actively select an investment option, a default scheme is assigned automatically to ensure continuous and managed growth of their contributions.

Benchmark Corpus in UPS

The concept of a Benchmark Corpus is introduced to assess the adequacy of an individual's retirement savings. This benchmark is a predefined value that acts as a reference point for evaluating whether a subscriber’s total accumulated corpus at the time of retirement is sufficient. If the individual’s corpus exceeds this benchmark, the surplus amount is returned to the subscriber. 

However, if the total falls short of the benchmark, the individual has two options: they can either contribute additional funds before retirement to bridge the gap or accept proportionately reduced pension payouts during their retirement years. This mechanism ensures a fair, performance-linked evaluation for each subscriber.

Eligibility to Avail Benefits Under UPS

This section explains the eligibility conditions for receiving benefits under UPS after retirement:

1. Eligibility for Benefits

• Superannuation: Employees who retire after completing at least 10 years of government service become eligible for UPS benefits. These benefits are payable from the actual date of retirement (superannuation).
• Retirement by Government under FR 56(j): If an employee is retired by the Government under Fundamental Rule 56(j) (which allows retirement in the public interest but is not a disciplinary penalty), then they are eligible to receive UPS benefits starting from their date of retirement.
• Voluntary Retirement: Employees who voluntarily retire after 25 years of service will also receive UPS benefits. However, their pension benefits will be calculated and released from their notional superannuation date—i.e., the date they would have normally retired.
• Exclusions: UPS benefits will not be extended to employees who resign from service, are dismissed, or are removed from their post due to disciplinary or administrative reasons. Such cases are treated as disqualifications from the pension scheme.

2. Computation of Benefits

• Lump Sum Payment: A one-time retirement payout is calculated based on the last drawn Basic Pay and Dearness Allowance (DA). The amount is computed as 1/10th of the Basic Pay + DA for every completed six-month period of service.
• Assured Monthly Payout: Employees who have completed a minimum of 10 years of service will receive a monthly pension equivalent to 50% of the average Basic Pay drawn over the last 12 months before retirement. This payout is subject to a minimum guarantee of ₹10,000 per month.
• Proportionate Payout: For employees who have completed between 10 to 25 years of service, the pension benefits will be calculated on a pro-rata basis, depending on their total qualifying service duration.
• Admissible Payout: The Admissible Payout refers to the final pension amount that an employee is entitled to receive under the UPS. This amount may be subject to reduction in specific cases as outlined below.
• Reduction in Assured Payout: The full assured monthly payout may be reduced proportionally in one or both of the following scenarios:
• Insufficient Corpus: If the employee’s Individual Corpus (IC) is less than the Benchmark Corpus (BC) at the time of retirement.
• Final Withdrawal: The employee or spouse may choose to withdraw up to 60% of the corpus before retirement.

In case of a shortfall between the individual and benchmark corpus, the subscriber is allowed to top up the gap at or before retirement to retain the full pension benefits.

• Final Withdrawal Option: Employees (or their legally wedded spouses) are allowed to withdraw up to 60% of the total corpus as a lump sum. However, this will lead to a proportionate reduction in the assured monthly pension payout.
• Family Payout: In the unfortunate event of the subscriber’s death, the legally wedded spouse will receive a monthly family pension equivalent to 60% of the last admissible payout for the rest of their life.

3. Additional Benefits

Dearness Relief (DR) is provided on both admissible and family pension payouts based on the prevailing Central Government rates. It becomes applicable only after pension disbursement begins. Additionally, specific service periods such as suspension (if the employee is later exonerated), approved study leave, and deputation under government orders are treated as part of the qualifying service. These considerations ensure that the employee’s service duration accurately reflects all eligible time periods for the purpose of pension calculation and benefits under the Unified Pension Scheme (UPS).

Payment of Benefits under UPS

• General Payment Rules: All payments under the UPS are made in accordance with government regulations. To initiate the process, employees or eligible family members must submit their application using the prescribed forms (Schedule I) to the Head of Office or Drawing & Disbursing Officer (DDO).
• Application Process: Employees retiring under superannuation or voluntary retirement need to fill out Form B1. In case of death, the spouse should submit Form B3 if the employee had availed UPS benefits or Form B5 if they hadn’t. For those who retired earlier, the subscriber must submit Form B2, while the spouse should use Form B4 or B6 as applicable.
• Corpus Transfer & Reduction: At retirement, the individual corpus is shifted to the Pool Corpus, which is limited to the benchmark corpus value. If the corpus falls short of the benchmark, the assured monthly payout is reduced unless the subscriber adds the shortfall. Retirees before 31 March 2025 will receive payouts directly from the Pool Corpus without any transfer.
• UPS Payout Order: The Pay and Accounts Office (PAO) issues the payout order and forwards it to the NPS Trust. This includes all key details like service history, final corpus, bank account information, and pension amount. For those who opted for voluntary retirement after 25 years, payments begin from their notional superannuation date.
• Processing & Payment: Once approved by the NPS Trust, the following payments are released—monthly pension (admissible payout), lump sum, final withdrawal (up to 60%), any surplus corpus, and Dearness Relief (DR). Both the pension and DR are credited monthly to the subscriber’s bank account.

UPS Withdrawal Rules and Conditions

1. Complete Withdrawal at Retirement: Employees may withdraw up to 60% of their UPS savings when they retire, reducing their ongoing pension payments. If the employee passes away, their spouse gets 60% of the last pension amount for life. Dearness Relief applies only after pension payments begin.

2. Partial Withdrawals During Service: Employees can withdraw funds thrice while employed after a three-year waiting period. Each withdrawal is limited to 25% of the employee’s contributions and is permitted for specific needs, such as:

• Home Purchase or Construction: Allowed if the employee doesn’t already own a house.
• Children’s Needs: Funds can support higher education or marriage expenses for kids.
• Medical Costs: Covers treatment for chronic diseases or disabilities.
• Personal Growth: Supports self-development or skill-building efforts.
• Withdrawal Process Flexibility: A family member can start the process if an employee is too sick to request funds.

3. Repayment Option: Employees can return the withdrawn amount to maintain their full pension benefits later.

Unified Pension Scheme vs National Pension Scheme

The comparison between the two schemes is as follows:

Conclusion

The Unified Pension Scheme (UPS) 2025 is bold and inclusive in India’s social security landscape. It simplifies retirement planning, integrates fragmented systems, and brings formal pension benefits to the doorstep of every Indian citizen—from a corporate executive in Mumbai to a weaver in Varanasi.

Now is the time to act if you are between 18 and 60. Evaluate your savings, assess your post-retirement needs, and consider enrolling in UPS. It’s not just about saving money; it’s about securing your independence, peace of mind, and dignity in your later years.

Disclaimer: The above information has been thoroughly researched and compiled by the Protean eGov Technologies Limited team. It is intended for informational purposes only and reflects the latest understanding of UPS guidelines as interpreted by our experts.

FAQs

1.Under what circumstances shall the assured payout option under UPS not be available to the Central Government employees?

The assured payout under UPS isn’t available if an employee retires before 10 years of service or is removed, dismissed, or resigns.

2. Are there any minimum payout guarantees?

The minimum payout is ₹10,000 monthly, even if your calculated amount (half average pay × QS/300) is less, like ₹5,177, which would then be raised to ₹10,000.

3. How do I track my UPS details?

To track UPS details, check your PRAN on the CRA portal or payroll system for monthly updates on Individual Corpus, Benchmark Corpus, Units, and NAV details.

4. What happens if I die after joining UPS?

If you die after joining UPS: Before retirement, your nominee receives your Individual Corpus per NPS rules, no UPS benefits. After retirement, your spouse gets 60% of the payout plus DR, e.g., ₹15,720 becomes ₹14,714 monthly (56% DR).

5.How much do I contribute to the UPS?

You pay 10% of your monthly basic pay (including non-practising allowance, if any) plus DA to UPS. The government matches it with 10%. For ₹50,000 pay + DA, both contribute ₹5,000 each, making ₹ a total monthly contribution of 10,000 to your PRAN.

Written by Bruhadeeswaran R.

Bruhadeeswaran R. is a B2B content expert with 14+ years of experience, specializing in National Pension System (NPS), PAN, DPI, eSignPro, and Central KYC. As Editor and Lead Content Writer at Protean eGov Technologies, he simplifies complex e-governance topics through engaging blogs, reports, and digital content.