Major Pension Reform: Govt Employees In NPS, UPS To Get Full Gratuity Benefits | Business News

Last Updated:June 19, 2025, 13:36 IST

The Centre has extended full retirement and death gratuity benefits to all personnel under the NPS and UPS, equating them with the Old Pension Scheme (OPS)

In a landmark decision that affects lakhs of government employees, the Centre has extended full retirement and death gratuity benefits to all personnel enrolled under the National Pension System (NPS) and the newly introduced Unified Pension System (UPS), bringing them on par with their counterparts in the Old Pension Scheme (OPS). The move has been hailed as a long-awaited and “historic” step towards pension parity across schemes.

The announcement was made on Wednesday, June 18, by Union Minister of State for Personnel Jitendra Singh, who clarified that all central government employees under NPS will now be eligible to receive gratuity benefits under the CCS (Pension) Rules, 2021, rules that previously applied only to OPS beneficiaries. This includes gratuity payments up to Rs 25 lakh in the event of retirement, death, disability, or dismissal during service.

Unified Pension System (UPS) Embedded Within NPS

This shift follows the formal notification of the Unified Pension System (UPS), a hybrid model introduced by the government earlier this year which said that all new entrants to the central civil services, starting April 1 this year, would be given the option to choose between NPS and UPS at the time of appointment.

Unlike NPS, which is market-linked and subject to stock market fluctuations, OPS guarantees a fixed post-retirement pension. UPS aims to bridge this gap by blending features of both systems; it provides the security of a guaranteed pension while maintaining some of the flexibility of NPS. The inclusion of gratuity benefits further strengthens UPS’s appeal to prospective government employees.

In a major policy shift, the Ministry of Personnel has also clarified that in case of an employee’s death, disability, or removal from service, their family members will have the option to choose between UPS, NPS, or OPS-linked benefits, depending on what best suits their needs. “This fulfills a longstanding demand of central government employees. It not only ensures parity but also enhances the morale and financial security of the workforce,” said Union minister Jitendra Singh.

Welcoming the decision, Manjeet Singh Patel, President of the All India NPS Employees Federation, called it “a historic and much-needed reform.” This will dispel many myths and doubts around NPS, and we expect a large number of employees to opt for UPS, which now offers a sense of financial security similar to the old pension model, he added.

Gratuity Cap Set At Rs 25 Lakh

Personnel Secretary V Srinivas emphasised that the policy revision strengthens social security for government employees. “With this notification, all employees, whether they are under NPS or UPS, will be entitled to gratuity benefits up to Rs 25 lakh,” he said. This decision underscores the government’s commitment to employee welfare and retirement dignity, he further said.

First Published: