Scrapping of New Pension Scheme
Representations have been received
regarding the implementation of National Pension System (NPS) which,
inter alia, include demand that NPS may be scrapped and the Government
may re-introduce old defined benefit pension system.
Government has made a conscious move to
shift from the defined benefit pay-as-you-go pension scheme to defined
contribution pension scheme, now called as National Pension System
(NPS), after considering the rising and unsustainable pension bill. The
transition also has the added benefit of freeing the limited resources
of the Government for more productive and socio-economic sectoral
development.
There is no proposal to replace the NPS
with old pension scheme in respect of Central Government employees
recruited on or after 01.01.2004.
(e): National Pension System (NPS) had
been designed giving utmost importance to the welfare of the
subscribers. There are a number of benefits available to the employees
under NPS. Some of the benefits are enlisted below:
• NPS is a well designed pension system
managed through an unbundled architecture involving intermediaries
appointed by the Pension Fund Regulatory and Development Authority
(PFRDA) viz. pension funds, custodian, central record keeping and
accounting agency, National Pension System Trust, trustee bank, points
of presence and Annuity service providers. It is prudently regulated by
PFRDA which is a statutory regulatory body established to promote old
age income security and to protect the interest of subscribers of NPS.
• Dual benefits of Low Cost and Power of Compounding- The pension wealth which accumulates over a period of time till retirement grows with a compounding effect. The all-in-costs of the institutional architecture of NPS are among the lowest in the world.
• Tax Benefits- Contribution made to the NPS Tier-I account is eligible for tax deduction under the Income Tax Act, 1961. An additional tax rebate of Rs.50000 is also allowed for contributions made to NPS Tier-I under Section 80CCD (IB) of the Income Tax Act, 1961.
• Transparency and Portability is ensured through online access of the pension account by the NPS subscribers, across all geographical locations and portability of employments.
• Partial withdrawal- Subscribers can withdraw up to 25% of their own contributions before attaining age of superannuation, subject to certain conditions.
• Dual benefits of Low Cost and Power of Compounding- The pension wealth which accumulates over a period of time till retirement grows with a compounding effect. The all-in-costs of the institutional architecture of NPS are among the lowest in the world.
• Tax Benefits- Contribution made to the NPS Tier-I account is eligible for tax deduction under the Income Tax Act, 1961. An additional tax rebate of Rs.50000 is also allowed for contributions made to NPS Tier-I under Section 80CCD (IB) of the Income Tax Act, 1961.
• Transparency and Portability is ensured through online access of the pension account by the NPS subscribers, across all geographical locations and portability of employments.
• Partial withdrawal- Subscribers can withdraw up to 25% of their own contributions before attaining age of superannuation, subject to certain conditions.
The amount of monthly annuity payable to
a Government servant on exit from NPS depends upon various factors such
as accumulated pension wealth of the Government servant, portion of
accumulated pension wealth utilized for the purchase of annuity and the
type of annuity purchased.
Under the defined benefit pension system
applicable to Government servants appointed before 01.01.2004, pension
is calculated based on qualifying service and the last pay drawn by the
Government servant.
Authority: Lok Sabha
