NPS is far beneficial than
Government Pension – Comparison of New Pension Scheme (National Pension
Scheme) and Central Government Pension
The Central Government employees
who have joined after 1/1/2004 and are put under National Pension Scheme
(NPS) have been demanding abolition of NPS and have been persuading the
Central Government to make the government pension scheme applicable to
them.
This only exhibits their ignorance
of the fact that the New Pension Scheme is highly lucrative and make
the government employees who joined after 1/1/2004 far richer than the
government employees who enjoy government pension scheme. By doing so
they are in the process of ruining the great fortunes that lies in store
under New Pension Scheme. Let me compare both the scheme:
Comparison of New Pension Scheme (National Pension Scheme) and Central Government Pension
Benefits under NPS
Let me take a case of Upper
Division Clerk(UDC) who joins government service in 2014 at the age of
25 and renders 35 years of service till attaining 60 years of age. He /
She gets 3% annual increment every year and gets one promotion every 10
year under M.A.C.P. Although he / she is likely to get 14 to 20%
increase in D.A every year as per Consumer Price Index I just take
12%(assuming 6 + 6%) 2 times D.A in a year
* MACP / Promotion Years
(A) Therefore, the total pension
wealth of a government servant who joined in 2014 and retiring under New
Pension Scheme shall at the time of his retirement be Rs.
2,87,26,201/-
(B) 60% of the lump-sum pension wealth which he / she will be getting on retirement:
Rs.1,72,35.720
(C) 40% invested in an annuity scheme which he / she can receive before 70 years:
Rs.1,14,90,481
(D) Earned Leave Encashment: Rs. 215625 x 10 months : Rs. 21,56,250
TOTAL of (A) (B) (C) and (D) will be Rs. 3,08,82,451
Death Gratuity:
Although not entitled for retirement gratuity, but eligible for Death Gratuity If died during the service
Monthly Pension:
At the assumed Interest at the
rate of 8.7% per annum on the other 40% of pension wealth of
Rs.1,14,90,481 invested in annuity shall fetch
monthly pension of at least : Rs.83,306/ –
Not only this, before he / she
attains the age of 70 he / she can withdraw the remaining 40% of his
pension wealth of Rs. 1,14,90,481/- which if invested in Fixed Deposit
of a nationalised bank can fetch interest and take care of not only of
his wife and children but his descendants also for generations to come.
This is just a tip
of the iceberg. If we consider the other 4 pay commission benefits that
materialize on1/1/2016, 1/1/2026, 1/1/2036 and 1/1/2046 which a NPS
pensioner who joins as UDC shall be getting before his retirement in
2049,his total pension wealth will be undoubtedly double the above
amount which comes to more than Rs.5 crores. While a person who joins as
U.D.C. gets this much, one will be rocked out of stupor to know what a
Group A officer who renders 35 years of service may get – undoubtedly
his total pension wealth will be more than Rs.10 crores.
Benefits under Central Government Pension Scheme
Now let us see what will be the retirement benefits of the above person if he / she is put in government pension scheme:
1.Gratuity for 16.5 months :
Rs.2,15,625 x 16.5 months = Rs.35,57,812/- Restricted to Rs.10,00,000
2. Earned Leave Encashment:
Rs. 215625 x 10 months : Rs.21,56,250
3. Pension Commutation:
Rs.17195 x 40% = Rs.6878 x 12 x 8.194 years Rs 6,76,300
Total Benefits under Central Government Pension Scheme: Rs.38,32,550
4. GPF Balance:
As it is a general tendency of the
government servants to withdraw from GPF frequently, there will be very
little left at the time of retirement
5. Monthly pension
i) Rs.34390 / 2 = Rs.17195 (basic
pension being 50% of pay and grade pay Less 40% of basic pension towards
commutation (Rs 6878) which will be restored after 15 years
Balance basic pension is Rs. 10317
ii) DA @ 527% of basic pension of Rs.17195 = Rs. 90617 (subject to increase in DA every 6 months based on consumer price index)
Total pension is Rs.1,00,934 per month.
After the death of government
servant say after 67 years, spouse can take only 60% of the basic
pension i.e.Rs.17195 x 60% = Rs.10317 plus D.A.at the prevailing rates.
After spouse’s death children are unlikely to draw the pension as they
would have already crossed the age limit. Thus, unlike the dependents of
NPS pensioners, there will be nothing left for financial security of
the dependents of the government pensioners .
Thus it is unwise on the part of
government servants who have joined after 1/1/2004 to demand for
abolition of NPS scheme and grant of government pension.
Mr.M.Dorai
Deputy Director
ESIC Model Hospital,
Bangalore (Ministry of Labour, Government of India) is the author of this Article.
