Finance ministry allows one-time switch from new pension scheme to NPS

Finance ministry notification enables Central staff under the Unified Pension Scheme to shift to NPS once, not later than a year before superannuation

The finance ministry on Monday allowed central government employees who opted for the Unified Pension Scheme (UPS) to switch back to the National Pension System (NPS) through a one-time, one-way switch facility.

 

According to a finance ministry notification, the option can be exercised any time up to one year before superannuation, or three months before the deemed date of retirement in case of voluntary retirement.

 

“It has been decided that a one-time, one-way switch facility from UPS to NPS shall be made available to all central government employees who have opted for UPS.  This switch facility may be exercised by UPS optees any time not later than one year prior to the date of superannuation or three months prior to the deemed date of retirement in case of voluntary retirement, as applicable.  Similar provisions will be made for resignation and cases of Rule 56J, with minor modifications as necessary. If switch facility is not exercised as per aforesaid timelines, the employee shall continue under UPS by default,” said the Department of Financial Services notification.

 

The notification added that the facility, however, will not be available to employees facing removal, dismissal, compulsory retirement as penalty, or where disciplinary proceedings are pending or contemplated.

 

Once an employee switches to NPS, the Pension Fund Regulatory and Development Authority’s Exit and Withdrawal Regulations, 2015 will apply. This means they will no longer be entitled to the assured payouts under UPS. The government’s differential contribution of 4 per cent in the default investment pattern will be calculated and credited to the employee’s NPS corpus at the time of exit. 

 

Only 1.37 per cent of eligible central government employees have opted for the UPS so far.

 

In a written reply to the Lok Sabha on July 28, 2025, the Finance Ministry informed that as of July 20, 2025, a total of 31,555 employees had opted for the scheme.  The government has given an extension of three months till September 2025 to the employees from the earlier deadline of June 30, 2025 to exercise their option under the scheme. 

Minister of State for Finance Pankaj Chaudhary said that the UPS has been introduced as an option under the NPS for the employees of the central government who are covered under the NPS, with the objective of providing assured payouts to the employees. 

 

In August 2024, the Information & Broadcasting Minister Ashwini Vaishnaw said, “UPS is being implemented by the central government, benefiting 230,000 central government employees.”