OLD VS NEW, PENSION SCHEME – GOVERNMENT SCHEME

OLD VS NEW, PENSION SCHEME – GOVERNMENT SCHEME 

 

News: In a significant deci­sion, the government has decided to give a one-time option to select Central government employees to migrate to the Old Pension Scheme (OPS)

 

More in news:

  1. The employees should have applied for jobs advertised before December 22, 2003, the day the National Pension System (NPS) was notified, but joined service in 2004, when the NPS came into effect. The option is available to the Central government employees enrolled under the NPS as they joined service on or after January 1, 2004.
  2. The order will also be applicable to the Central Armed Police Forces (CAPF) personnel.

 

 

Old Pension Scheme

New Pensions Scheme

  1. Defined pension scheme
  2. No need of contributions from employees
  3. Pension is based on the last drawn salary and length of service.
  4. Upon retirement, employees receive 50% of their last drawn basic pay and dearness allowances or their average earnings in the last ten months of service, whichever is more advantageous to them.
  5. Entire expenditure under OPS was borne by the government.
  6. Only government employees were eligible for OPS
  1. Contributory pension scheme
  2. Employer and employee contribute their respective shares
    1. Employee’s contribution is 10% of their basic salary
    2. The government’s contribution is 14%
  3. NPS is regulated by Pension Fund Regulatory and Development Authority (PFRDA)
  4. National Pension System Trust (NPST) established by PFRDA is the registered owner of all assets under NPS.
  5. NPS id market based returns over long term
  6. It not only covers government employees but also covers private sector employees.
  7. Age limit: 18 years to 70 years
  8. The funds are then invested in earmarked investment schemes through Pension Fund Managers.
  9. Schemes under the NPS are offered by nine pension fund managers
    1. It is sponsored by SBI, LIC, UTI, HDFC, ICICI, Kotak Mahindra, Adita Birla, Tata, and Max.
  10. At retirement, they can withdraw 60% of the corpus, which is tax-free and the remaining 40% is invested in annuities, which is taxed.