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:
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
| YEAR | D.A. assumed @ 12% Per annum |
PAY + GRADE PAY with 3% annual increment |
D.A | TOTAL | Total Monthly Subscription (employee and Govt) |
Annual Subscription |
Annual Appreciation of Investments @ 8.7% Only |
TOTAL PENSION WEALTH |
| 2014 | 107% | 9,910 | 10,604 | 20,514 | 4,102 | 49,224 | 2,320 | 51,544 |
| 2015 | 119% | 10,210 | 12,150 | 22,360 | 4,471 | 53,652 | 7,012 | 1,12,208 |
| 2016 | 131% | 10,520 | 13,781 | 24,301 | 4,860 | 58,320 | 12,511 | 1,83,039 |
| 2017 | 143% | 10,840 | 15,501 | 26,341 | 5,268 | 63,216 | 18,903 | 2,65,158 |
| 2018 | 155% | 11,170 | 17,314 | 28,484 | 5,696 | 68,352 | 26,290 | 3,59,800 |
| 2019 | 167% | 11,510 | 19,222 | 30,732 | 6,146 | 73,752 | 34,779 | 4,68,331 |
| 2020 | 179% | 11,860 | 21,229 | 33,089 | 6,618 | 79,416 | 44,487 | 5,92,234 |
| 2021 | 191% | 12,220 | 23,340 | 35,560 | 7,112 | 85,344 | 55,546 | 7,33,124 |
| 2022 | 203% | 12,590 | 25,558 | 38,148 | 7,630 | 91,560 | 68,097 | 8,92,781 |
| 2023 | 215% | 12,970 | 27,886 | 40,856 | 8,172 | 98,064 | 82,293 | 10,73,138 |
| 2024* | 227% | 14,130 | 32,075 | 46,205 | 9,240 | 1,10,880 | 98,589 | 12,82,607 |
| 2025 | 239% | 14,560 | 34,798 | 49,358 | 9,872 | 1,18,464 | 1,17,170 | 15,18,241 |
| 2026 | 251% | 15,000 | 37,650 | 52,650 | 10,530 | 1,26,360 | 1,38,041 | 17,82,642 |
| 2027 | 263% | 15,450 | 40,634 | 56,084 | 11,216 | 1,34,592 | 1,61,433 | 20,78,667 |
| 2028 | 275% | 15,920 | 43,780 | 59,700 | 11,940 | 1,43,280 | 1,87,596 | 24,09,543 |
| 2029 | 287% | 16,400 | 47,068 | 63,468 | 12,694 | 1,52,328 | 2,16,809 | 27,78,680 |
| 2030 | 299% | 16,900 | 50,531 | 67,431 | 13,486 | 1,61,832 | 2,49,371 | 31,89,883 |
| 2031 | 311% | 17,410 | 54,145 | 71,555 | 14,312 | 1,71,744 | 2,85,614 | 36,47,241 |
| 2032 | 323% | 17,940 | 57,946 | 75,886 | 15,178 | 1,82,136 | 3,25,893 | 41,55,270 |
| 2033 | 335% | 18,480 | 61,908 | 80,388 | 16,078 | 1,92,936 | 3,70,601 | 47,18,807 |
| 2034* | 347% | 21,060 | 73,078 | 94,138 | 18,828 | 2,25,936 | 4,21,184 | 53,65,927 |
| 2035 | 359% | 21,700 | 77,903 | 99,603 | 19,920 | 2,39,040 | 4,78,101 | 60,83,068 |
| 2036 | 371% | 22,360 | 82,956 | 1,05,316 | 21,064 | 2,52,768 | 5,41,139 | 68,76,975 |
| 2037 | 383% | 23,030 | 88,205 | 1,11,235 | 22,248 | 2,66,976 | 6,10,878 | 77,54,829 |
| 2038 | 395% | 23,730 | 93,734 | 1,17,464 | 23,492 | 2,81,904 | 6,87,954 | 87,24,687 |
| 2039 | 407% | 24,450 | 99,512 | 1,23,962 | 24,792 | 2,97,504 | 7,73,068 | 97,95,259 |
| 2040 | 419% | 25,190 | 1,05,546 | 1,30,736 | 26,148 | 3,13,776 | 8,66,975 | 1,09,76,010 |
| 2041 | 431% | 25,950 | 1,11,845 | 1,37,795 | 27,560 | 3,30,720 | 9,70,498 | 1,22,77,228 |
| 2042 | 443% | 26,730 | 1,18,414 | 1,45,144 | 29,028 | 3,48,336 | 10,84,535 | 1,37,10,099 |
| 2043 | 455% | 27,540 | 1,25,307 | 1,52,847 | 30,570 | 3,66,840 | 12,10,066 | 1,52,87,005 |
| 2044* | 467% | 29,640 | 1,38,419 | 1,68,059 | 33,612 | 4,03,344 | 13,48,977 | 1,70,39,326 |
| 2045 | 479% | 30,530 | 1,46,239 | 1,76,769 | 35,354 | 4,24,248 | 15,01,283 | 1,89,40,857 |
| 2046 | 491% | 31,450 | 1,54,420 | 1,85,870 | 37,174 | 4,46,088 | 16,68,876 | 2,10,55,821 |
| 2047 | 503% | 32,400 | 1,62,972 | 1,95,372 | 39,074 | 4,68,888 | 18,53,953 | 2,33,78,662 |
| 2048 | 515% | 33,380 | 1,71,907 | 2,05,287 | 41,058 | 4,92,696 | 20,57,162 | 2,59,28,520 |
| 2049 | 527% | 34,390 | 1,81,235 | 2,15,625 | 43,126 | 5,17,512 | 22,80,169 | 2,87,26,201 |
* 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 on 1/1/2016, 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.DoraiDeputy DirectorESIC Model Hospital,Bangalore (Ministry of Labour, Government of India) is the author of this Article.
The views expressed in this article are those of the guest author and are not intended to represent the views of www.staffnews.in
Source: http://www.gconnect.in/nps-2/nps-cg-employees/nps-far-beneficial-government-pension.html
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COMMENTS
NPS is basically No Pension System. Just rubbish and should be scrapped.If old pensioners are so interested to join , then should submit a demand to Government to transfer them to under NPS.
If old pensioners were getting 100rs then we will get 20rs under NPS.
And BJP govt always do these things to make happy the corporates.
Dear All,
If NPS is so good then all old pension scheme beneficiaries should be offered to join NPS. All benefits of NPS can be back calculated in time with the similar return as GPF (because these are similar to NPS). Then we would like to see how many join NPS and try to prove NPS is better then old pension.
Regards
Dear Sir,
The assumptions towards NPS are very optimistic while they are negative for Old pension scheme (No change in any limit). Your calculations also shows that the pension in old pension schemes are higher even in present rules (If person live longer). Furthermore, the different ceiling limits always change with the time. And old scheme pensioner get DA which continuously increases with time. The life expectancy is also increasing with the improved health care facilities. If you take the inflation adjusted return of NPS then one would need Rs 7 Crore in annuity to get Rs 70,000 /- as pension if he/she has to retire after 22 years from today. Overall NPS is not bad but the government contribution should be at least increased to 25% from 10% (at present).
Hi guys,
I agree with the author of the article ‘’NPS is far beneficial than Government Pension’’ for the following reasons:
1. One thing every one forget is under NPS scheme the government servant gets huge amount on retirement which is many times more than what a government servant under old pension scheme gets as per the comparison shown in the article' . Whatever be the salary increase or inflation factor after 35 years, but the proportion of variation between the retirement benefits of old defined pension scheme and the corpus in new pension scheme shall grow at same level because the mathematical principal can never get changed.
2. With this money a government servant can even acquire a residential property for his dependants which gets appreciated for generations to come and as well comfortably live on interest on the other 40% invested in annuity in Life Insurance etc from where the government servant, his spouse and parents can get pension till death . Thereafter the 40% annuity amount can be withdrawn fully by the children and the blood relations of the government servant if there are no children left. This will also be of immense help to the dependants in addition to a residential property left behind by the government servant..
3. Whereas with the very little retirement benefits paid in cash to government servant under old defined pension scheme he cannot think of acquiring a property. He has to depend on monthly pension which comes to an end after death and there afterwards no financial security available for the dependents.
4. One should know why a government servant under old pension scheme opts for commutation of 40% of basic pay for 8.154 years and is ready to take less pension for 15 years thus permanently losing his 40% of basic pension amount for almost 7 years towards interest adjusted against commutation of pension for 8.154 years.
Because having more money has its own advantage and is liked by all the government servants than depending on more monthly pension. If there is a provision for 100% commutation of basic pay, I am quite sure every one will be ready to opt for it. Even if government give option for Golden Hand Shake Scheme, more than 90% of government servants under old pension scheme may prefer it.
DEVENDAR PRASAD
Excellent article by the author The article is a great revelation not known to anyone so far. From the comparison of NPS benefits and old pension scheme benefits on the basis of VI CPC pay scale, it is clear that there is a huge difference in the retirement benefit of a government pensioner and the NPS pensioner. While the new pension wealth is Rs.3,08,82,451, the retirement benefit under government pension scheme is only Rs.38,32,550 as per the present rule of retirement benefit calculation for government pensioners which is correctly shown in the article. Even if ceiling limit on gratuity is removed it will come to Rs.63,90,362 only. The pension and the bank interest amount on retirement benefit of government pensioner will be much lower than the pension and bank interest amount on retirement benefits of NPS pensioner.
Where is Rs. 3,08,82,451/- and where is Rs.38,32,550/-? It is always better to have more money at ones disposal than to depend on monthly pension which ends after the death. I fully agree with the article with one
JAINENDER PRASAD
MR. ANONYMOUS, ARE YOU NOT GETTING 50% OF GOVERNMENT CONTRIBUTION WHICH ACCOUNTS TO 50% OF YOUR TOTAL NEW PENSION SCHEME WEALTH WHICH MAKES YOU MILLIONAIRE? WHY ARE YOU JEALOUS OF GOVERNMENT PENSIONERS GRATUITY? WE GOVERNMENT PENSIONERS ARE POOR FELLOWS WHO GET VERY LITTLE RETIREMENT BENEFITS AT THE TIME OF RETIREMENT WHICH I REALIZE ON READING THIS ARTICLE.. ALL OUR RETIREMENT BENEFITS AND THE PENSION WHICH WE MAY BE GETTING TILL DEATH WILL BE LESSER THAN 50% OF YOUR TOTAL NEW PENSION WEALTH WHICH YOU ARE GETTING BECAUSE OF GOVERNMENT GOVERNMENT SHARE.
THE ARTICLE OF THE AUTHOR MR. DORAI, BEING A DEPUTY DIRECTOR, IN ESIC, MINISTRY OF LABOUR IS CRYSTAL CLEAR THAT NPS IS BENEFICIAL.THERE IS NO DOUBT AT ALL.
SATHYANARAYANA. C
Mr. Anonymous, with all regard,
U rightly said 50% contributed by the Govt. then author should have been taken 50% of total pension wealth accumulated at the time of retirement as retirement benefit under NPS wihle comparing NPS with old defined pesnionery benefits. Why should I JEALOUS OF ANY THING? I THINK U HAVE NOT READ MY COMMENTS IN TOTO. PLEASE READ IT CAREFULLY AND PONDER ON IT. GRAUTITY REVISED EVERY TIME WHEN PAY COMMISSION SET UP AND PUT UP THEIR RECOMMENDATIONS. U SHOULD INVEST 10% OF YOUR BAISC PLUS DA TO ANY PENSION SCHEME EITHER THROUGH NPS OR THORUGH INSURANCE COMPANIES AND U WILL GET CRORES PF RUPEES OUT OF UR SAVINGS. ANY ONE CAN INVEST IN NPS. SO ACTUAL BENEFIT UNDER NPS FOR GOVT. EMPOYEE IS ONLY 50% THAT IS THE CONTRIBUTION BY THE GOVT. WHILE ALL THE AMOUNT ADMISSIBLE UNDER OLD PENSION SCHME IS GOVT. CONTRIBUTION EXCEPT GPF. IF ONE DO NOT WITHDRAW MONEY FROM GPF, THEN GPF ACCUMULATION CAN ALSO MAKE GOVT. EMP. MULTI MILLIONARE(CROREPATI). PRIOR TO DEFINED PENSION THERE WAS CPF IN WHICH GOVT. CONTRIBUTED 10% PF BP + DA AS IN THE PRESENT CASE OF NPS. THE GOVT. SERVANTS THEN OPTED OUT OF CPF AND CHOSE TO DEFINED PENSION SHCEME BECASUE DEFINED PENSION SCHEME WAS MORE BENEFIAL THAN CPF. THE AUTHOR HAS NOT DONE FAIR & SUARE COMPARISON BETWEEN NPS AND OLD PENSION AND SHOULD HAVE PRESENTED CORRECT PICTURE. THE RETURN UNDER NPS IS NOT GUARANTEED WHICH MAKE IT VULNERABLE.
MY INTENSION IS PUT CORRECT PICTURE OF BOTH THE PENSION SCHEME OLD PENSION AND NPS AND FAIR COMPARISON BETWEEN THEM. IT IS MISINTERPRETATION OF NPS ACT THAT UNDER NPS THERE IS NO GRATUITY BUT IT WAS CLARIFIED BY DoPT & MoF THAT NPS IS ONLY REPLACEMENT OF OLD EXISTING DEFINED PENSION BUT NOT THE REPLACEMENT OF WHOLE PENSIONERY BENEFIT AND ALSO CLARIFIED THAT GRATUTITY IS ADMISSIBLE UNDER NPS AND RULES REGARDING THIS ARE BEING FRAMED.
MY INTENSION IS TO PUT
MY INTENSION IS TO PUT CORRECT PICTURE
1. Under NPS, retirement gratuity is applicable as regulation are being framed by DoPT since NPS is only replacement of old defined pension scheme.
2. Returns under NPS are not guaranteed. In 2013-14, NPS for CG employees gave worst return. Minimum return of atleast 9% should be guaranteed by Govt.
3. NPS is taxable at the the time of retirement while old pensionary benefit is not taxable.
4. Old defined pension is liable to be increased with increase in DA and pay commssion while amount of pension under NPS is fixed and no increase on any acct.
5. Retirement gratuiry of Rs. 1000000/- is present limit and is liable to be increased after every pay commission and in 2049 it would be Rs. 35 to 40 lakhs.
6. Half the amoun t under NPS is accumulation of emp. contribution which can be gain by any one by investing every month in fixed income instrument like RD, mutual fund etc.
7. GPF facility is a great relief for CG emp. as one can withdraw money on requirement basis as the case may be but there is no GPF for NPS employees.
8. Either NPS should be scraped and old defined pension as pre 2004 should be given to all or Minimum guaranteed return of at least 9% should be ensured by Govt. for NPS with Govt. comtribution to NPS should be increased to 15 % from current 10% of BP & DA. Gratuity for full service years with restriction of Rs. 60 lakh under gratuiry for NPS who will be retiring between 2036 to 2040. Leave encashment should be 350 days for NPS with provison of encasing HPL. Such provisions make NPS more attractive and thus bring equality between old pension scheme and NPS.