Railway employees got a big option! Opportunity to quit NPS to join UPS, know new rules on pension and VRS

The Union government on Wednesday clarified all the guidelines for railway employees related to the Unified Pension Scheme i.e. UPS through a notification, clearing doubts about the pension options. Under the new rules, railway employees who have completed at least 25 years of qualifying service will be guaranteed pension of 50 per cent of their average basic pay for the 12 months preceding their retirement. Along with this, existing employees covered under National Pension System (NPS) will get a one-time option to switch to UPS.

The new guidelines have also clarified the pension status for employees taking VRS. If an employee takes voluntary retirement after completing the minimum period of service, he will also be entitled to assured pension, while on completion of 10 years of service, he will get a minimum pension of Rs. 10,000, and after completing 25 years of service, he can get full pension. Apart from this, the family will also get the benefit of 60 percent more dearness relief in case of death of the employee. The central government launched the UPS scheme under NPS on April 1, 2025. Many central government departments are implementing UPS one after the other, and now the railways have also started this pension scheme for their employees.

Which railway employees will be covered under UPS?

UPS includes those railway employees who were appointed on or after January 1, 2004 and who fall under the purview of NPS. As per the notification, casual or daily wage labourers, contract employees and certain categories of employees covered under the rules of other pension schemes will not be able to join UPS.

Contribution to UPS Corpus by Employee and Employer

Railway UPS subscribers have to deposit 10 percent of their basic pay and dearness allowance (DA) in their personal UPS account every month. This contribution shall continue even if the employee is on probation or deputation in any department of the Central or State Government. Railways will also credit 10% of basic pay and DA of employees in their UPS corpus. As per Pension Fund Regulatory and Development Authority (PFRDA) rules, the government also deposits around 8.5 percent of basic pay + DA in the pool corpus that provides fixed pension to employees on retirement.

Amount of Pension for Railway Employees under UPS

According to the notification, on completion of 25 years of service, the employees will get a fully guaranteed pension, which will be 50 percent of the average basic pay of the last 12 months before retirement. If the service is between 10 and 25 years, the salary of the employee will be proportionately reduced.

Family Pension for Railway Employees under UPS

As per the notification, the legally married spouse will be paid family pension on the date of retirement or superannuation. The payment of family pension received will be 60% of the entire pension.

Pension after opting for Voluntary Retirement Scheme (VRS).

UPS rules for railway employees allow them to take voluntary retirement after completing 20 years of service. Pension payments will be based on years of service. If an employee takes VRS after completing 25 years of service, the pension will be 50 percent of the average basic pay of the last 12 months preceding retirement. If the period of service is less than 25 years, the employee will get a pro-rata guaranteed payout. Under UPS, if a person takes VRS, their annuity payments will start from the date the employee reaches retirement age and not immediately after voluntary retirement.

UPS Pension if railway employee resigns

In case of general resignation, the right to guaranteed pension under UPS will be lost. The employee will get the pension amount deposited in the personal corpus at once. The same rule shall apply in case of dismissal or removal of the employee. In case of compulsory retirement, the payment cannot be less than two-thirds of the whole pay and cannot be more than the whole pay. If the resignation is given with proper permission for another job under the Central Government, there will be no loss of benefits of UPS.

UPS Pension on Death of Railway Servant

In this case, the applicable UPS benefits will depend on the option selected and the circumstances. If an employee dies after completing 15 years of service without opting for UPS option, the family may get the benefit of pension under applicable Railway Pension Rules under certain circumstances.

Switching from UPS to NPS for Railway Employees

If a railway employee wants to switch from UPS to NPS, he can do so once during his service. Once they opt for NPS, they cannot switch back to UPS. If they opt for NPS, the government’s contribution to their NPS corpus will be 14 percent of their basic salary.

These people will not be able to switch from UPS to NPS

• 12 months before retirement
• Three months before voluntary retirement
• In certain situations of resignation/compulsory retirement
• When departmental or judicial proceedings are ongoing/pending.

Dearness relief will be available on UPS pension

There will be no fixed pension scheme for UPS Railway employees as UPS subscribers also get dearness relief (DR) on their basic pension. DR is also available on family pension.

Individual versus benchmark corpus

Personal corpus in UPS is the investment made by the employer and the return on it. Individual corpus is the net asset value (NAV) of the units in the UPS account linked to the employee’s Permanent Retirement Account Number (PRAN). The benchmark corpus is a hypothetical reference corpus calculated using the default investment pattern and assuming regular UPS contributions without any special withdrawals.

PFRDA says that if an employee’s personal corpus at the time of retirement is less than the benchmark corpus, the assured payout can be reduced by the same amount. In such a situation, the employee can make up the shortfall subject to the rules.