NPS vs UPS: What you need to know about these pension schemes in India

Learn how to apply for the pension schemes in India, especially the NPS and UPS. Understand what they are and how to secure your financial future

By Forbes India

Published: May 16, 2025 04:30:45 PM IST

Most of us spend years working hard, but when it comes to planning for life after retirement, we tend to overlook it - until it starts feeling a little too real. For good reasons, pension schemes in India are getting much more attention. With increasing life expectancy and rising costs, many people are rethinking their financial management strategies. The government has introduced several pension schemes in India that offer structured solutions to help citizens save for their future.

The National Pension Scheme or National Pension System (NPS) and the Unified Pension Scheme (UPS) are among the most common options. While both fall under the broader umbrella of government-backed pension schemes, they work differently and are often mixed up. Understanding the key differences between NPS and UPS could greatly affect how your retirement fund shapes up.

In this post, let’s discuss the eligibility requirements and the benefits for the applicant in more detail.

What is the National Pension Scheme (NPS)?

The National Pension Scheme is a retirement-focused investment plan launched by the government in 2004. It started as a scheme for new Central Government employees (except those in the armed forces), but by 2009, it was opened to every citizen on a voluntary basis. The Pension Fund Regulatory and Development Authority (PFRDA) regulates it under the PFRDA Act, 2013.

When you sign up, you're given a Permanent Retirement Account Number (PRAN), which stays with you even if you change jobs or locations. NPS provides two types of accounts:

Tier I: This is strictly meant for retirement savings and has restrictions on withdrawals.
Tier II: This is more flexible, and you can withdraw the amount whenever you want, but it doesn’t offer any tax advantages.

Some of the clear benefits? It’s portable across jobs and states, easy to track, and low-cost. With regular monitoring, transparent investment norms, and performance reviews by NPS Trust, you’ll be able to track the value of the investment effectively.

As of March 31, 2025, the total subscriber base for the National Pension Scheme in India reached nearly 20 million (~19.8 lakh crore), with applicants from central and State governments and even the corporate sectors.

Understanding the Unified Pension Scheme (UPS)

The Unified Pension Scheme is the latest retirement initiative rolled out by the Central Government, effective April 1, 2025. It’s aimed at Central and State Government employees and is being introduced as an alternative to the existing NPS. The main goal? To bring more clarity, predictability, and long-term financial support for around 23 lakh government staff. UPS is an attempt to simplify the pension schemes in India and address the demands of the retired employees with a more secure income model.

The Central and State government employees covered under NPS are eligible for this scheme. They can choose to switch from NPS, but this decision is irreversible. Spouses of deceased NPS subscribers, who passed away before opting for the UPS, can also register. But you won't be eligible for the scheme if you’ve resigned before completing ten years of government service before April 2025.

But why is UPS so important? It promises a fixed pension, a minimum monthly pension of ₹10,000, family pension, and relief allowances - all government-backed. While that’s reassuring, switching from NPS to UPS also means choosing between assured stability and flexible returns.

Comparing NPS and UPS

Here’s an insight into NPS and UPS and their specifics:

Features	National Pension Scheme (NPS)	Unified Pension Scheme (UPS)
Eligibility criteria	Open to all Indian citizens aged between 18 and 60, including government and corporate employees	Central and State Government employees, including new recruits and those in service as of and after April 1, 2025
Pension amount	Depends on market performance and the amount invested in the NPS	Assured 50 percent of average basic salary (last 12 months) for those with 25+ years of service and proportionate benefits for those with 10 to 25 years of service
Gratuity	Not available under NPS	Provided along with a one-time lump sum payment on retirement
Tax benefits	Up to 60 percent of the amount withdrawn is tax-free, and 40 percent used for annuity purchase post-retirement is taxable under specific sections	Yet to be officially clarified by the government
Employers’ contribution rate	14 percent of the employee’s basic salary	18.5 percent of the employee’s basic salary + Dearness allowance (DA)
Risks associated	Market-linked funds - returns vary depending on fund performance	Low risk - offers guaranteed pension benefits

How can you apply for these pension schemes in India?

Applying for the NPS and UPS is quite a straightforward process:

To apply for the National Pension Scheme, visit the official website of eNPS at: https://enps.nsdl.com/eNPS/NationalPensionSystem.html. Click on Register Now to select the category applicable to you. You’ll need a PAN, a mobile number linked to Aadhaar, date of birth, and a valid email ID for the initial registration. Once registered, a Permanent Retirement Account Number (PRAN) will be issued.
For the Unified Pension Scheme, you can fill out Form A1 for new registration or Form A2 if you're migrating from the NPS. Along with the application form, you must submit relevant documents like identity and address proof, PAN, and date of birth. All necessary forms and detailed instructions can be downloaded from the official portal at: https://www.npscra.nsdl.co.in/ups.php. You can also apply via the eNPS portal for new registration and migration from the NPS.
These pension schemes in India - NPS and UPS - represent the growing digital finance ecosystem and secure financial planning. If you want to enjoy long-term financial benefits after retirement, it’s better to start planning early.