NPS is far beneficial than Government Pension

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:

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	AnnualAppreciationof 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.