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The government has made an important announcement regarding the pension scheme. The Finance Ministry has issued an order saying that a one-time option will be given to switch from the Unified Pension Scheme (UPS) to the National Pension System (NPS). This decision will benefit lakhs of central employees, because now they will be able to choose the pension scheme according to their needs and convenience.

Now the question arises, when and how will you be able to switch? This switch can be done only once and in one direction. Employees choosing UPS can shift to NPS up to one year before the date of retirement. If someone is retiring voluntarily, then they will have to choose this option up to 3 months in advance. Employees who resign or have disciplinary cases will not get this facility.

What will be the effect of moving from UPS to NPS?

As soon as the employee goes to NPS, he will not get the guaranteed pension of UPS.

An additional 4% contribution of the government will be added to the NPS account.

After this, the employee will get money only under the rules of NPS. PFRDA (Exit & Withdrawal under NPS) Regulations, 2015 will be applicable.

Who will not get this opportunity?

Employees who have been removed, dismissed, or are undergoing disciplinary investigation will not get this facility. If the switch is not made by the stipulated time limit, the employee will remain at UPS by default.

UPS vs NPS - What is the difference?

Comparison Points UPS (Unified Pension Scheme) NPS (National Pension System)
Pension Guaranteed Pension Market-based returns
Contribution Both government and employee Both government and employee
Facility to switch once, Switch to NPS, No return to UPS done
The employee does not have control over the investment. The Employee can choose the fund
Risk Very low Dependent on market

Why did the government take this decision?
The government believes that due to the simultaneous running of both UPS and NPS schemes, employees were facing a lack of options. UPS is a new scheme, but many employees consider NPS to be more flexible. For this reason, the government has given this one-time opportunity to the employees to decide their retirement plan according to their convenience by moving from UPS to NPS.

Big benefit for employees

Now employees have flexibility.

If they want a guaranteed pension, they can stay in UPS.

If they expect higher market-based returns, they can move to NPS.

The government's additional 4% contribution to NPS will also benefit them.

Conclusion
This decision of the government gives flexibility to the employees in pension planning. However, after moving to NPS, the guaranteed pension of UPS will have to be given up. In such a situation, employees should take the right decision keeping in mind their age, financial needs and risk-taking ability.

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