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UPS Subscribers Get Gratuity Benefits Like NPS Members; Deadline to Switch Extended

Written by: Kusum KumariUpdated on: 4 Jul 2025, 2:06 pm IST
UPS subscribers now get retirement and death gratuity benefits like NPS. The government extends the switch deadline to Sept 30 to help employees decide.
UPS Subscribers Get Gratuity Benefits Like NPS Members; Deadline to Switch Extended
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Central government employees who have chosen the Unified Pension Scheme (UPS) will now receive gratuity benefits similar to those offered under the National Pension System (NPS). The Department of Pension and Pensioners’ Welfare (DoPPW) confirmed this in an official circular. 

Employees retiring or dying in service will be entitled to gratuity payments calculated as one-fourth of their salary for every 6 months of completed service. The maximum payout is capped at 16.5 times the salary or ₹25 lakh, whichever is lower.

Extra Lump Sum Payment

Besides gratuity, UPS subscribers will also get an additional lump sum payment. This is equal to 10% of the salary and dearness allowance for each completed 6 months of service, further boosting retirement savings. The combination of gratuity and lump sum payments will provide a stronger financial cushion for retirees.

Flexibility to Choose Between UPS and OPS

Government employees in UPS still have the option to switch to the Old Pension Scheme (OPS) in certain cases, such as death, invalidation, or disablement during service. To give employees more time to decide, the Finance Ministry has extended the deadline to switch to UPS until September 30, 2025. This extension applies to active NPS subscribers eligible for UPS, retired employees, and the spouses of deceased retirees.

Guaranteed Pension and Government Contributions

The UPS ensures a guaranteed pension payout. Employees who serve at least 25 years will get 50% of their average pay from the last 12 months as pension, with regular increases to adjust for inflation. While the government contributes 18.5% of the salary into UPS (higher than NPS), only 10% goes directly into the employee’s pension account. This higher contribution demonstrates the government’s focus on securing employees’ post-retirement finances.

Read More: Key Financial Changes from July 2025: Aadhaar-PAN Linking, Taxes, Railways, HDFC Credit Cards, and More!

Taxation and Withdrawal Rules

Both UPS and NPS allow employees to withdraw up to 60% of their total corpus when they retire. However, clarity about whether UPS lump sum withdrawals will get the same tax exemptions as NPS withdrawals is still awaited. Unlike NPS, which depends on the final corpus and annuity rates, UPS guarantees a fixed pension.

Conclusion

With the new gratuity provisions, UPS now offers a more comprehensive retirement safety net, aligning it closer to NPS. Employees must evaluate their financial goals, retirement plans, and the guaranteed payouts of UPS before making a choice. The deadline extension gives them more time to make an informed decision that best secures their future.

Disclaimer: This blog has been written exclusively for educational purposes. The securities or companies mentioned are only examples and not recommendations. This does not constitute a personal recommendation or investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Investments in securities are subject to market risks. Read all related documents carefully before investing. 

Published on: Jul 4, 2025, 8:34 AM IST

Kusum Kumari

Kusum Kumari is a Content Writer with 4 years of experience in simplifying financial market concepts. Currently crafting insightful content at Angel One, She specialise in breaking down complex topics into easy-to-understand pieces, blending expertise in market fundamentals and technical analysis.

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