The update is, for all intents and purposes, mandatory, as laid out here, specifically:
The optimistic plan is:
v0.9 supports new repository format by default, old format can be still be enabled using flags v0.10 supports old and new format, will be prompting legacy users to migrate to the new format v0.11 supports new repository format only, old index format not supported
Assuming that there are no significant issues with the repository format, it will be made mandatory in the future and backwards compatibility is not guaranteed, so you are better off upgrading.