Retired NPS subscribers to get top-up, lump sum under Unified Pension Scheme

The Central government has introduced enhanced retirement benefits under the Unified Pension Scheme (UPS) for eligible National Pension System (NPS) retirees. Individuals who retired on or before March 31, 2025, and have completed at least 10 years of qualifying service can now avail of these additional benefits.

In cases where the subscriber is deceased, their legally wedded spouse is eligible to claim these benefits. The UPS offers enhancements over the existing NPS payouts, making it an attractive option for retirees seeking financial security.

The key benefits of the Unified Pension Scheme include a one-time lump sum payment, a monthly pension top-up, and interest on any arrears. They include a one-time lump sum payout, a monthly pension top-up, and applicable interest on any arrears.

Specifically, retirees will receive a lump sum equal to one-tenth of their last drawn basic pay plus dearness allowance for every completed six months of qualifying service. This scheme encompasses various retirement circumstances, including superannuation, voluntary retirement, and retirement under FR 56(j).

In situations where the monthly NPS annuity falls short of the guaranteed pension under UPS, the government will provide a monthly top-up to make up the difference.

Moreover, retirees can claim arrears with simple interest calculated at the prevailing Public Provident Fund (PPF) rates. This provision ensures that retirees receive a predictable and stable pension, addressing the variable nature of NPS payouts.

The UPS, which came into effect on April 1, 2025, aims to guarantee a fixed pension benefit. For individuals with a service period of 25 years or more, the scheme ensures a pension equivalent to 50% of the average basic pay over the last 12 months of service. This feature is particularly significant for retirees seeking dependable financial support during their post-retirement years.

Eligible retirees or their spouses can apply for UPS benefits either offline or online by June 30, 2025. For offline applications, the prescribed forms—Form B2 for subscribers and Form B4/B6 for spouses—must be submitted to the Drawing and Disbursing Officer of their last office. These forms are accessible on the official NPS website. The online application process can also be completed through the same platform, providing flexibility for applicants.

UPS rollout

The Pension Fund Regulatory and Development Authority (PFRDA) has issued the UPS Regulations, 2025, detailing the eligibility criteria and the claims process. Furthermore, PFRDA is conducting webinars to assist retirees and stakeholders in understanding the scheme's nuances, ensuring that applicants are well-informed about their entitlements and the application process.

The introduction of the UPS marks a significant shift in how pension benefits are structured for central government retirees, reflecting the government's commitment to enhancing the financial welfare of its former employees. By providing an additional layer of security and predictability, the scheme aligns with broader initiatives to support retirees in navigating their post-retirement years with greater financial stability.

As the deadline for applications draws near, retirees are encouraged to review the details of the scheme and submit their applications promptly to take full advantage of these newly available benefits. 

Here's a quick recap of UPS vs NPS vs OPS

Particulars	UPS (Unified Pension Scheme)	NPS (National Pension System)	OPS (Old Pension Scheme)
Eligible employees	Central Government employees	Government employees, individuals aged 18–60 years, and NRIs	Government employees
Pension amount	50% of the average basic pay in the last 12 months before retirement (with 25+ years of service)	Depends on corpus accumulation and investment performance	50% of last drawn salary plus DA or average of previous 10 months, whichever is higher
Minimum pension	₹10,000/month for employees with at least 10 years of service	No fixed minimum; depends on accumulated contributions	₹9,000/month for employees with at least 10 years of service
Gratuity	Retirement and death gratuity available	No provision for gratuity	Gratuity up to ₹20 lakh paid at retirement
Family pension	60% of the last drawn pension paid to family upon death of the retiree	Based on corpus and chosen annuity plan	Pension amount continues to the family after retiree’s death
Employer contribution	18.5% of basic salary	14% of basic salary	No employer contribution
Employee contribution	10% of basic salary	10% of basic salary	No employee contribution
Risk factor	Risk-free with assured pension payout	Market-linked returns; carries investment risk	Risk-free with guaranteed pension
Lump sum benefit	1/10th of last drawn monthly pay for every 6 months of completed service at retirement	60% of accumulated corpus can be withdrawn tax-free	Up to 40% of pension can be commuted as lump sum at retirement
Tax benefits	Unclear on tax benefits for contributions	60% of corpus tax-free on withdrawal; 40% taxable if invested in annuity	No tax benefit available
Inflation protection	Pension adjusted as per AICPI-IW	No automatic inflation adjustments	DA and DR revised biannually to offset inflation

Source: ClearTax