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 System (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
System 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 System.
Let me compare both the scheme:
Comparison of New Pension Scheme (National Pension System) 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:
Gratuity for 16.5 months :
Rs.2,15,625 x 16.5 months = Rs.35,57,812/- Restricted to Rs.10,00,000
Earned Leave Encashment:
Rs. 215625 x 10 months : Rs.21,56,250
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
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
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
