Effect of Dismissal or Removal from Government Service on UPS Assured Payout: Explained
The Department of Pension & Pensioners’ Welfare (DoPPW) has issued a new Office Memorandum dated 29 October 2025 clarifying what happens to the Assured Payout for Central Government employees covered under the Unified Pension Scheme (UPS) when they are dismissed or removed from service.
This clarification is important because UPS is a newly introduced pension framework under the National Pension System (NPS), and many employees are still learning how its rules apply in different service conditions.
What Do the UPS Rules Say?
The Central Civil Services (Implementation of Unified Pension Scheme under NPS) Rules, 2025 define the service-related norms for employees under UPS.
Rule 21 specifically deals with the impact of dismissal or removal on the pension benefits.
Under this rule:
1. Assured Payout Is Forfeited
If a Central Government employee who has opted for UPS is dismissed or removed, they lose their right to the Assured Payout available under the scheme.
This means the guaranteed portion of the pension will not be paid after dismissal or removal.
What Happens to the Accumulated Pension Wealth?
Even though the assured payout is forfeited, the employee does not lose everything.
According to the OM:
- The entire accumulated pension wealth in the employee’s individual UPS corpus
- Will be paid as a lump sum
And the payment will be made to:
- The subscriber (employee), or
- In case of death, the legally married spouse, or
- If no spouse exists, the legal heir(s)
This disbursement follows the PFRDA (Operationalisation of UPS under NPS) Regulations, 2025.
So, while assured benefits are forfeited, the investment-based corpus remains payable.
No Impact on Gratuity Rules
The order clearly states that the action under UPS Rule 21 is:
“Without prejudice to any order passed under CCS (Payment of Gratuity under NPS) Rules, 2021.”
This means:
- Eligibility for gratuity will be decided separately,
- As per the existing gratuity rules for NPS employees,
- And forfeiture of UPS assured payout does not automatically affect gratuity entitlement.
Implementation Instructions to All Ministries
All Ministries, Departments, and subordinate/attached offices have been instructed to:
- Circulate this rule among personnel handling UPS/NPS matters,
- Ensure proper awareness,
- And implement these provisions strictly.
Why This Clarification Matters
With UPS being a hybrid scheme offering both corpus-based benefits and assured payouts, clarity on service termination cases is essential. This OM ensures:
- Transparency in pension rights
- Protection of accumulated corpus
- Clear distinction between punitive action and earned financial rights
- Consistent application across all Central Government offices