Context:
The Finance Ministry has introduced a one-time, one-way switch for Central government employees to move from the newly launched Unified Pension Scheme (UPS) to the National Pension System (NPS).
Unified Pension Scheme (UPS) vs. National Pension System (NPS):
Unified Pension Scheme (UPS)
- What it is:
- Introduced April 1, 2025, as an option within NPS for Central government employees.
- Provides assured payouts post-retirement.
- Enrollment deadline: September 30, 2025.
- Key Features:
- Offers minimum guaranteed pension (exact rate to be notified).
- Combines elements of the old defined-benefit pension scheme and the defined-contribution NPS.
- Contributions by both employee and employer, but with an assured payout on retirement.
- Designed to address employee demands for security without fully reverting to the Old Pension Scheme (OPS).
National Pension System (NPS)
- What it is:
- A defined-contribution pension scheme introduced in 2004 for government employees (except armed forces) and later opened to all citizens.
- Key Features:
- Employees and employers contribute regularly to a pension corpus.
- Final pension depends on market returns, no guaranteed payout.
- Regulated by PFRDA (Pension Fund Regulatory and Development Authority).
