Government big decision: Amidst the increasing demand for the Old Pension Scheme (OPS), the Central Government has given such a gift to lakhs of employees, which has given a new direction to the debate on the pension system. Now, government employees will get the right to switch from their Unified Pension Scheme (UPS) to the National Pension System (NPS) once. The government has made it clear that this facility will be one-time and unilateral. That is, once the employees leave UPS and adopt NPS, they will not be able to go back to UPS again.
This decision has come at a time when employee organizations in various states are constantly demanding restoration of the old pension. This step of the government is being seen as balancing the existing system and giving more options to the employees.
The way was opened to switch from UPS to NPS
The government started UPS from April this year. This scheme was given to new employees joining the civil services of the Central Government from 1 April 2025. Also, government employees already enrolled in NPS were also given the opportunity to choose UPS. In March 2025, the Pension Fund Regulatory and Development Authority (PFRDA) issued the necessary rules for this.
According to the data, till July 20, about 31,555 central government employees have opted for UPS. The last date for enrollment in this scheme has been fixed as 30 September. But now the government has opened an additional facility for the employees adopting UPS—if they wish, they can shift from UPS to NPS anytime before retirement.
Big announcement of the Finance Ministry
The Finance Ministry clarified in its office memorandum that employees taking UPS will be given the right to switch from UPS to NPS at any time. This switching will be valid up to one year before their retirement date or three months before the estimated retirement date in case of voluntary retirement.
That is, employees will have enough time and options in view of their future. This decision not only provides flexibility but also gives new freedom to employees in planning their financial security.
Improvement in gratuity and other benefits
The central government has not only provided the facility of switching, but has also increased the benefits of retirement gratuity and death gratuity under UPS. Apart from this, employees who will retire due to death, disability or disability during service while being in NPS after choosing UPS will be eligible to get the benefits under CCS (Pension) Rules, 2021 or CCS (Extraordinary Pension) Rules, 2023.
The government has also kept UPS at par with NPS in terms of tax exemption. That is, now employees taking UPS will also get the same tax exemption under the Income Tax Act, 1961, as those with NPS.
Promise of tax savings and better returns
The National Pension System (NPS) has long been a center of attraction due to its tax benefits and returns on investment. As per the current rules, employees contributing to NPS can avail a tax exemption of up to 10% of their basic salary and DA under section 80CCD (1). This exemption is included in the limit of ₹1.50 lakh of section 80CCE.
Apart from this, an additional tax exemption of up to ₹50,000 is also available under section 80CCD (1B). The contribution made by the employer is tax-free under section 80CCD (2). The special thing is that the contribution made by the central government comes under the tax-free exemption of up to 14%, which is a big benefit for the employees.
What does this decision mean for employees?
This decision of the government is not just a technical change in the pension system, but it is being considered a big step towards financial security and future planning. Employees are now getting better options in both UPS and NPS schemes. While UPS focuses on providing stability and guaranteed benefits, NPS opens the way to better returns and tax savings through market-based investments.
In such a situation, this decision can prove to be a boon for those employees who want to choose the right plan based on the circumstances and financial needs during their job.
Flexibility will strengthen trust
This move of the Central Government is creating a new definition of balance in the ongoing debate on pensions. By providing a one-time facility to switch from UPS to NPS, the government has given the message that it wants to give employees more control over their future.
Economic experts believe that this flexibility will increase the confidence of employees and will give them the power to make the right decisions at different stages of their careers. In the coming times, this change can change the picture of the pension system and can guarantee a more secure future to government employees than ever before.