NPS is far beneficial than Government Pension

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

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%

9910

10604

20514

4102

49224

2320

51,544

2015

119%

10210

12150

22360

4471

53652

7012

1,12,208

2016

131%

10520

13781

24301

4860

58320

 12511

 183039

2017

143%

10840

15501

26341

5268

63216

 18903

 265158

2018

155%

11170

17314

28484

5696

68352

 26290

 359800

2019

167%

11510

19222

30732

6146

73752

 34779

 468331

2020

179%

11860

21229

33089

6618

79416

 44487

 592234

2021

191%

12220

23340

35560

7112

85344

 55546

 733124

2022

203%

12590

25558

38148

7630

91560

 68097

 892781

2023

215%

12970

27886

40856

8172

98064

 82293

 1073138

2024*

227%

14130

32075

46205

9240

110880

 98589

 1282607

2025

239%

14560

34798

49358

9872

118464

 117170

 1518241

2026

251%

15000

37650

52650

10530

126360

 138041

 1782642

2027

263%

15450

40634

56084

11216

134592

 161433

 2078667

2028

275%

15920

43780

59700

11940

143280

 187596

 2409543

2029

287%

16400

47068

63468

12694

152328

 216809

 2778680

2030

299%

16900

50531

67431

13486

161832

 249371

 3189883

2031

311%

17410

54145

71555

14312

171744

 285614

 3647241

2032

323%

17940

57946

75886

15178

182136

 325893

 4155270

2033

335%

18480

61908

80388

16078

192936

 370601

 4718807

2034*

347%

21060

73078

94138

18828

225936

 421184

 5365927

2035

359%

21700

77903

99603

19920

239040

 478101

 6083068

2036

371%

22360

82956

105316

21064

252768

 541139

 6876975

2037

383%

23030

88205

111235

22248

266976

 610878

 7754829

2038

395%

23730

93734

117464

23492

281904

 687954

 8724687

2039

407%

24450

99512

123962

24792

297504

 773068

 9795259

2040

419%

25190

105546

130736

26148

313776

 866975

 10976010

2041

431%

25950

111845

137795

27560

330720

 970498

 12277228

2042

443%

26730

118414

145144

29028

348336

 1084535

 13710099

2043

455%

27540

125307

152847

30570

366840

 1210066

 15287005

2044*

467%

29640

138419

168059

33612

403344

 1348977

 17039326

2045

479%

30530

146239

176769

35354

424248

 1501283

 18940857

2046

491%

31450

154420

185870

37174

446088

 1668876

 21055821

2047

503%

32400

162972

195372

39074

468888

 1853953

 23378662

2048

515%

33380

171907

205287

41058

492696

 2057162

 25928520

2049

527%

34390

181235

215625

43126

517512

 2280169

 28726201

* 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.Dorai
Deputy Director
ESIC 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 GConnect.

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