Govt Allows One-Time Switch from UPS to NPS

In a significant move impacting lakhs of Central Government employees, the Ministry of Finance has announced that those who opted for the Unified Pension Scheme (UPS) will now be given a one-time, one-way chance to return to the National Pension System (NPS).

According to an Office Memorandum issued on 20 August 2025, the option can be exercised any time up to one year before the date of superannuation, or in cases of voluntary retirement, up to three months before the deemed date of retirement. Similar timelines will also apply to resignations and cases dealt with under Rule 56(J), with minor modifications. If the employee does not exercise the option within these periods, they will continue under UPS by default.

The facility, however, comes with restrictions. Employees facing removal, dismissal, or compulsory retirement as a penalty are barred from availing it. Similarly, the switch will not be allowed if disciplinary proceedings are pending or contemplated against the employee.

Once an employee opts out of UPS and re-enters NPS, the decision is final. The PFRDA (Exit and Withdrawal under NPS) Regulations, 2015 will apply in such cases, and the individual will cease to be eligible for the assured benefits that come with UPS. Instead, the Government will compute its differential contribution of 4 per cent (at the default investment pattern) and credit the same to the individual’s NPS corpus at the time of exit.

The Finance Ministry has directed all Ministries and Departments to bring this development to the notice of eligible employees under their control

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