Central Government employees are facing a tough retirement decision: choose between the National Pension System (NPS) and the Unified Pension Scheme (UPS) by June 2025. The choice is crucial, as once made, it cannot be undone.

In a recent LinkedIn post, SEBI-registered investment advisor Abhishek Kumar highlighted the dilemma, asking, “Which option would you choose?”

The stakes are high, with distinct differences between the two options. Under the UPS, the government contributes 10% of an employee’s salary, plus an additional 8.5% to the employee’s pension fund. In contrast, the NPS offers a higher government contribution of 14%, but the eventual benefits depend on market-linked annuity plans.

When it comes to payouts, the choice boils down to stability versus potential growth.

Kumar explains that if you stick with NPS for 25 years, you could accumulate a corpus of ₹2.25 crore. Using 60% of this amount, you could receive ₹33,750 per month, with a 3% annual increase in the payout. The remaining 40% can be invested in a joint-life annuity, providing ₹52,500 per month at a 7% yield.

On the other hand, UPS offers a fixed pension of ₹84,658 per month (50% of final basic pay), adjusted for dearness allowance throughout retirement. Additionally, you would receive a lump sum payout of ₹8.45 lakh at the age of 60.

However, Kumar warns that UPS comes with its own set of risks—once you opt for it, there’s no going back to NPS. Moreover, if an employee exits government service before retirement, their UPS pension could either be delayed or reduced.

So, which is the better option?

Kumar advises that if you prioritize stability and guaranteed income, the UPS is the better choice. But if you are comfortable with market risks and prefer flexibility in the long run, the NPS might be a more suitable option.