Unified Pension Scheme: PFRDA notifies new rules from April 1 in new financial year

The Pension Fund Regulatory and Development Authority (PFRDA) has released regulations for the implementation of the Unified Pension Scheme (UPS) within the National Pension System (NPS). These updated guidelines, which will take effect on April 1, 2025, outline the qualifications and procedures for central government employees to enroll in UPS.

Eligibility for UPS

The regulations pertain to three groups of central government employees:

Existing Employees: Individuals already enrolled in the NPS as of April 1, 2025.
New Recruits: Individuals who join on or after April 1, 2025.
Retired Employees: Individuals previously covered under NPS who have retired, voluntarily left service, or retired under Fundamental Rule 56(j) on or before March 31, 2025.
In the event of the subscriber's passing before selecting UPS coverage, their lawful spouse is eligible to enroll.

How to enrol

To enroll for the new pension framework for central government employees under NPS, eligible employees can submit their enrolment and claim forms online through the Protean CRA portal (https://npscra.nsdl.co.in) starting April 1, 2025. 

Alternatively, physical submission is also an option. The government officially announced UPS as the new pension framework for central government employees under NPS on January 24, 2025.

UPS enrollment

The Pension Fund Regulatory and Development Authority has specified in a notification that eligible Central government employees have until June 30 to enroll in the Unified Pension Scheme (UPS), which will be operational from April 1.

The notification outlines the rules for the scheme, which offers five main benefits: assured pension, assured family pension, assured minimum pension, inflation indexation, and lump sum payment at superannuation, along with gratuity, all included in a comprehensive package. The UPS is open to government employees who have joined the service on or after January 1, 2004, as well as those who will be joining in the future, with the option of switching from NPS to UPS. State governments may also choose to offer the scheme on an optional basis to their employees.

The PFRDA notification specified that eligible employees must exercise the option to be covered under UPS within three months starting from April 1, 2025. New employees who join on or after April 1 will have a 30-day window to make their decision. Once the option is chosen, it is considered final and cannot be changed, as per the notification. “The option once exercised shall be final and irrevocable,” the notification said. 

What is UPS

The introduction of the Unified Pension Scheme (UPS) by the Central Government on August 24, 2024 aims to achieve a balance between fiscal policy and employee benefits. This new scheme provides government employees with a defined benefit pension, similar to the Old Pension Scheme (OPS), while maintaining the contributory nature of the National Pension System (NPS).

Under the UPS, government employees will receive a guaranteed pension equal to 50% of their average basic pay from the last 12 months before retirement. Currently, government employees are covered under the NPS and have the option to either remain in NPS or switch to the UPS scheme. Once the decision to join UPS is made, it is irreversible.

State governments also have the option to adopt and implement the UPS scheme for their employees. Maharashtra is the first state to implement UPS, with the cabinet approving the scheme for state government employees on August 25, 2024.

Under this new scheme, individuals with a minimum of 25 years of service would be eligible to receive a pension equal to 50% of their average basic pay from the last 12 months before retirement. Additionally, employees with at least 10 years of service would receive a fixed monthly pension of Rs. 10,000 upon reaching superannuation.

If the UPS scheme is implemented nationwide, it has the potential to positively impact more than 90 lakh government employees who are currently enrolled in the NPS scheme in India.