Comparison of New Pension Scheme (National Pension Scheme) and Central Government Pension
Written By Admin on November 13, 2014 | Thursday, November 13, 2014
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 sapost.blogspot.com.
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