Comparison of New Pension Scheme (National Pension Scheme) and Central 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	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 tamilpandt.blogspot.in