Planning for retirement in India is not an easy journey. Today, crores of salaried Indians save through EPF, while NPS has grown to over 1.6 crore private subscribers with a combined pension corpus of around ₹14.4 lakh crore across NPS and APY as of FY 2024–25. On top of that, the new Unified Pension Scheme (UPS) for central government employees now promises a guaranteed pension of about 50% of the last drawn basic pay, with a minimum pension of ₹10,000 per month for those who complete at least 10 years of service.
This article explains the basics of all three so you can understand who they are meant for, how contributions work and what kind of pension you can expect. By the end, you will have a clear idea of how EPF, NPS and UPS differ in terms of investment choices, risk, tax benefits and family protection, and which combination might suit your long‑term financial planning.
EPF vs. NPS vs. UPS: Learning the basics
What is EPF?
The Employees’ Provident Fund (EPF) is a retirement savings scheme for employees in India. Every month, a fixed part of your salary goes into the EPF. Your employer also adds money to your EPF account. The money in your EPF account earns interest over time. You can take out this money when you retire or in some special cases. The Employees’ Provident Fund Organisation (EPFO), a government body, manages the EPF.
What is NPS?
The National Pension System (NPS) is a retirement savings plan that anyone working in any sector, including government and private employees, can join (except armed forces who joined after January 1, 2004). In NPS, you can invest your money regularly in market-related products like equity and bonds. You can also choose how your money is invested based on how much risk you want. When you retire, you can take some money out and use the rest to buy an annuity, which gives you a steady pension every month.
What is UPS?
The Unified Pension Scheme (UPS) is a new pension plan for central government employees starting from April 1, 2025. It combines features of the Old Pension Scheme (OPS) and the NPS. Under UPS, employees will get a fixed pension that increases with inflation, instead of market-based returns like in NPS. Only central government employees who are currently under NPS can choose to move to UPS, and the last date to switch is November 30, 2025.
Also read : NPS vs. UPS: How to choose the right pension scheme
EPF vs. NPS vs. UPS: Eligibility
EPF eligibility
- Mandatory for employees with basic pay and dearness allowance up to Rs. 15,000.
- Employees with pay above Rs. 15,000 can opt for EPF contributions.
Note: Dearness allowance applies mainly to government employees, not usually the private sector.
NPS eligibility
- Open to all Indian citizens—including residents, non-residents, and Overseas Citizens aged 18 to 70, subject to KYC norms.
- Central Government employees joining from January 1, 2004, (except Armed Forces) are mandatorily covered.
- Extended to employees of Central Autonomous Bodies, State Governments, State Autonomous Bodies, and corporate employees of eligible companies.
- NPS accounts must be individual, not opened for third parties.
UPS eligibility
- Available to Central Government employees under NPS as of April 1, 2025.
- New recruits joining Central Government service from April 1, 2025, onward.
- Retired NPS subscribers who retired on or before March 31, 2025, with at least 10 years of qualifying service, non-penal retirement, and a legally wedded spouse at retirement if deceased.
- Option exercise deadlines:
- Existing employees/retirees: by November 30, 2025 (or extended government deadline).
- New recruits: within 30 days of joining.
EPF vs. NPS vs. UPS : How much to contribute
When you save for retirement through EPF, NPS or UPS schemes the amounts and the way your savings are managed differ depending on the scheme.
EPF contribution:
In the EPF scheme you contribute 12% of your basic salary + DA. Your employer also contributes the same amount, 12% of your basic salary plus DA.
However, the employer’s contribution is divided into two parts :
a) 3.67% goes to your EPF account, which is your own retirement savings fund
b) 8.33% goes into the Employees’ Pension Scheme (EPS), which helps provide a pension later.
For salaries above ₹15,000, the employer's pension contribution is capped at 8.33% of ₹15,000, with any excess contributions being credited to the provident fund account.
c) Additionally, employers contribute 0.50% to the Employee's Deposit Linked Insurance Scheme (EDLI) and another 0.50% toward administrative charges.
The money you contribute in EPF earns interest at a rate declared by the government every year.
NPS contribution:
In coparate NPS, you contribute 10% of your salary every month, which includes your basic pay and DA. You also have the option to contribute more.
If you're a central government employee, your employer contributes 14% of your basic salary plus DA each month to your NPS account.
The money from your contributions is invested in different financial assets such as stocks (equity), corporate bonds, and government securities by fund managers appointed by the government. The returns you earn on your NPS savings depend on how well these investments perform in the market, so they can change over time. This means your pension depends on the total money accumulated through these market-linked investments.
UPS contribution:
UPS is a newer scheme for central government employees who were previously enrolled in NPS. Like NPS, as an employee, you contribute 10% of your basic salary plus DA every month. Your employer also contributes 10% of the same amount. Beyond that, the government adds an extra 8.5% of your basic pay plus DA on your behalf. This additional money is pooled together to secure the pension promises of the scheme and ensure that the pension you receive is guaranteed each year. Unlike NPS, where your pension depends on market performance, UPS provides a guaranteed pension amount that does not fluctuate with market ups and downs. This gives the assurance of steady income after retirement.
How much pension or return will you get under EPF, NPS or UPS?
Pension under EPF
Your EPF savings, built from contributions and interest, can be withdrawn fully at retirement or partially for specific needs like illness or housing. Moreover, the EPS scheme provides a superannuation at the age of 58 years. If a member leaves employment between 50 and 57 years he can avail the early (reduced) pension.
Pension under NPS (National Pension System)
The money you get from NPS at retirement depends on how much you put in and how well the investments perform in the market. When you turn 60, you can withdraw up to 60% of your total NPS corpus tax-free. The remaining 40% must be used to buy an annuity—this gives you a regular pension income, but it will be taxed as per income rules.
Pension under UPS
This scheme guarantees a pension that is about 50% of your last salary (average of the last year), if you work at least 25 years. If you work less than 25 years, you get a proportionate pension. Also, if you retire early after 10-25 years of service, you will still get a pension, with the minimum being Rs 10,000 each month. If you pass away after retirement, your spouse can receive 60% of your pension as a family pension.
EPF vs. NPS vs. UPS: What are the investment options for employees?
When it comes to investing options, EPF, NPS and UPS differ a lot.
Investment option under EPF
EPF does not give individual employees investment choices. Your fund is mainly invested in securities and other safe instruments with guaranteed interest rates declared annually by the government.
Investment options under NPS
NPS gives you more control and flexibility, allowing you to choose from 11 different fund management companies in India. Each fund manager has their own investment strategies, so it's important to pick one that matches your financial personality.
In NPS, you can decide how your contributions are allocated across three main asset classes:
- Equity (Scheme E): Invests in shares of companies and can give higher long-term returns but comes with higher risk due to market ups and downs.
- Corporate Bonds (Scheme C): Invests in bonds issued by private companies, usually giving lower but more stable returns than shares.
- Government Securities (Scheme G): Invests in government bonds, which are considered safest, offering stable but lower returns.
- Alternative investment (scheme A): Very high-risk investments in instruments like Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs),
You can also switch your investment choices periodically within the rules of the scheme.
Investment option under UPS
In contrast, under UPS, investment options for your individual retirement corpus are more limited. UPS is a hybrid pension scheme designed to offer a guaranteed pension payout rather than market-linked returns. The government manages the funds, and the focus is on ensuring a steady and inflation-protected pension rather than on investment risk and returns. While there is some option to select from predefined investment strategies (like conservative or moderate life cycle funds that limit equity exposure), the primary goal is pension security rather than market-linked growth. The government also makes an additional contribution to a pooled corpus which supports the guaranteed pension payouts.
EPF vs. NPS vs. UPS: Risk factor
Risk in EPF
EPF funds are invested conservatively mainly in government securities and safe instruments. The government declares EPF interest rates annually. EPF current interest rate is 8.25% per annum for the financial year 2024-2025. Returns are guaranteed with minimal market risk. However, inflation risk persists since interest rates may not always match inflation, potentially reducing real savings value over time.
Risk in NPS
NPS subscribers face two main risks: market risk and inflation risk.
- Market risk affects the entire investment corpus because returns depend wholly on market performance. Poor market conditions near retirement can reduce both the final corpus and pension significantly.
- Inflation risk is significant as NPS annuities are not inflation-indexed like UPS. High inflation over time can erode purchasing power substantially.
Risk in UPS
UPS offers a guaranteed pension after completing a minimum of 10 years of service. Although it provides stability, its sustainability depends on the government's management of the corpus and the ability to meet guaranteed payouts. Alternative investment options using benchmark corpus methodology could expose subscribers to market fluctuations if the corpus underperforms.
NPS vs. UPS: Taxation rules
Tax Benefits of EPF
One of the most attractive benefits of the EPF scheme is its tax advantages but it depends on the regime you choose. Under the old tax regime, your contributions to EPF (up to Rs 1.5 lakh per year) qualify for tax deduction under Section 80C of the Income Tax Act.
In the new tax regime, there’s no tax deductions for your own contributions. But the employer’s contribution towards EPF (up to 12% of your basic salary, capped at Rs 7.5 lakh per year) is still exempt from tax.
Additionally, the interest earned in your EPF account is completely tax-free as long as you stay invested for at least 5 continuous years. The maturity amount you withdraw after retirement or resignation is also fully tax-free if you have contributed for five or more years, making EPF a tax-efficient savings instrument.
But remember if you withdraw your EPF before completing 5 years of continuous service, the withdrawal amount becomes taxable. Hence, it is advisable to continue your EPF contributions for at least 5 years to enjoy tax-free maturity.
Tax rules on NPS
Tax deductions under the old regime:
Contribution made by an individual on his own to NPS are eligible for deductions, capped at lower of 10% of basic salary plus dearness allowance (if any) (salaried) / 20% of Gross Total Income (non-salaried) or actual amount of contribution under Section 80CCD(1)
Additionally, there's an extra deduction of up to ₹50,000 available for self-contribution to NPS under Section 80CCD(1B).
Contributions made by your employer to NPS are eligible for deductions, capped at 10% (14% for central government employees) of your basic salary plus dearness allowance (if any), with a maximum limit of ₹7.50 lakh under Section 80CCD(2).
Tax deduction under the new regime:
Contributions made by your employer to NPS are eligible for deductions, capped at 14% of your basic salary plus dearness allowance (if any), with a maximum limit of ₹7.50 lakh under Section 80CCD(2).
Tax rules on UPS
The Central Board of Direct Taxes (CBDT) earlier clarified that all the tax benefits currently available under NPS shall apply to the Unified Pension Scheme.
- The Central government contributes 10% of an employee's monthly emoluments (Basic Pay+Dearness Allowance) to their individual corpus, eligible for deduction under Section 80CCD(2).
- Employee contributions up to 10% of monthly emoluments to the UPS are eligible for a deduction under Section 80CCD(1).
- An additional 8.5% of monthly emoluments is contributed to the pool corpus, not taxable as salary for employees. The lump-sum payments at the time of retirement, calculated as 10% of monthly emoluments for each six months of service, are exempt from income tax under Section 10(12AB).
Benefits for family and succession
EPF
If a member passes away before withdrawing their EPF money, the entire amount saved in their EPF account is given to their nominees or legal heirs. Along with this, an extra insurance amount is also paid under the Employee Deposit Linked Insurance (EDLI) scheme. This ensures the family gets both the savings and some additional financial support in case of the member’s death.
NPS
If the person dies before taking out the amount from NPS, the nominee receives the total money accumulated in the account.
If death happens after the person has already purchased an annuity (a pension plan giving regular income), then the family’s benefits depend on the type of annuity chosen. Some annuity options have “return of purchase price,” meaning the original invested amount is given back to the nominee. Other options continue the pension for the spouse after the member’s death.
UPS
Under UPS, after the death of the employee, the legally wedded spouse is entitled to receive 60% of the pension amount that the employee was receiving. The process for the spouse to start getting this pension is usually easier compared to NPS. This makes it more straightforward for the family to continue receiving some income after the employee’s death.
Conclusion:
When making important retirement decisions like choosing between EPF, NPS, and UPS, consulting a Qualified Financial Advisor is highly recommended. A financial advisor crafts a personalised retirement plan tailored to your income, lifestyle goals, and risk appetite. They help diversify your investments, manage risk with the right insurance, and optimise tax benefits. Advisors also ensure you start planning early, keep your portfolio on track, and manage liabilities effectively. This expert guidance provides peace of mind, helping you build a secure and comfortable retirement while avoiding costly mistakes and ensuring your retirement savings last as long as you need them.
