Thursday, November 20, 2014

NPS is far beneficial than Government Pension


nps-2
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
YEARD.A. assumed @
12%
Per
annum		PAY + GRADE
PAY
with 3% annual increment		D.ATOTALTotal
Monthly
Subscription
(employee and Govt)		Annual
Subscription		AnnualAppreciationof Investments @
8.7%
Only		TOTAL
PENSION
WEALTH
2014107%99101060420514410249224232051,544
2015119%10210121502236044715365270121,12,208
2016131%105201378124301486058320 12511 183039
2017143%108401550126341526863216 18903 265158
2018155%111701731428484569668352 26290 359800
2019167%115101922230732614673752 34779 468331
2020179%118602122933089661879416 44487 592234
2021191%122202334035560711285344 55546 733124
2022203%125902555838148763091560 68097 892781
2023215%129702788640856817298064 82293 1073138
2024*227%1413032075462059240110880 98589 1282607
2025239%1456034798493589872118464 117170 1518241
2026251%15000376505265010530126360 138041 1782642
2027263%15450406345608411216134592 161433 2078667
2028275%15920437805970011940143280 187596 2409543
2029287%16400470686346812694152328 216809 2778680
2030299%16900505316743113486161832 249371 3189883
2031311%17410541457155514312171744 285614 3647241
2032323%17940579467588615178182136 325893 4155270
2033335%18480619088038816078192936 370601 4718807
2034*347%21060730789413818828225936 421184 5365927
2035359%21700779039960319920239040 478101 6083068
2036371%223608295610531621064252768 541139 6876975
2037383%230308820511123522248266976 610878 7754829
2038395%237309373411746423492281904 687954 8724687
2039407%244509951212396224792297504 773068 9795259
2040419%2519010554613073626148313776 866975 10976010
2041431%2595011184513779527560330720 970498 12277228
2042443%2673011841414514429028348336 1084535 13710099
2043455%2754012530715284730570366840 1210066 15287005
2044*467%2964013841916805933612403344 1348977 17039326
2045479%3053014623917676935354424248 1501283 18940857
2046491%3145015442018587037174446088 1668876 21055821
2047503%3240016297219537239074468888 1853953 23378662
2048515%3338017190720528741058492696 2057162 25928520
2049527%3439018123521562543126517512 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.
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