Showing posts with label NATIONAL PENSION SCHEME. Show all posts
Showing posts with label NATIONAL PENSION SCHEME. Show all posts

Tuesday, March 15, 2016

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NPS and EPF should get same tax benefits

Tax benefit to NPS can be given by exempting the pension received from income tax

Much has already been written about the proposal to tax 60 per cent of the Employees' Provident Fund (EPF) corpus on retirement and the subsequent rollback of this provision. As before, the entire corpus received back from EPF will continue to be completely exempt from tax. Thankfully, the proposal to exempt 40 per cent of the National Pension System (NPS) corpus is proposed to be continued. While this exemption is better than there being none at all, NPS will still remain a poor cousin compared to EPF.

The government has justified the proposal to tax the withdrawal of corpus from both NPS and EPF by citing international precedents. There is some logic in this argument.

The government, actually, contributes to building your retirement corpus by way of tax foregone on the amounts contributed and on the income generated on the corpus during the accumulation phase. It does so because this enables you to build a corpus that you can use to buy a monthly pension or, in other words, an assured monthly salary after you retire.

Tax foregone is an incentive so that after retirement, you do not become a burden on the government budget for social schemes for poor people. In most cases, the monthly pension that can be generated will be much lower than what you earned when you were active and, hence, will be lower than the amount that is chargeable to tax.

However, if the amount of pension generated in any year is high enough for it to be in the taxable bracket, then the government has every right to get back, at least, a small part of the tax that it had foregone earlier. This tax extracted from the relatively richer retirees can, then, be used to fund the social schemes to provide at least minimum sustenance to those people who have not been able to generate any such corpus or insufficient corpus.

So, in theory, this tax sounds justified. In the Indian context, however, there are no social schemes worth the name for the poorer retirees. So, this tax just ends up as a small morsel for the revenue-hungry government but takes a big bite out of the retiree's corpus.

There is another reason why this retirement tax is inequitable in the Indian context. The same principle of taxing at withdrawal what is foregone at the time of investment is not followed for many other investments. The biggest among these is the exemption of capital gains on sale of a residential house if invested in another residential house. This exemption is without any maximum limit at all (and can run into multiple crores per taxpayer) and if the taxpayer invests the capital gains in another residential house for only three years and sells that new residential house after three years, the entire capital gains remains tax exempt forever. It is also available to any number of residential properties owned by the taxpayer.

Even the poorest house owner who sells a house property to buy another is among the relatively well-off Indians and the majority of people who sell one house to buy another are among the top income quartile of all Indians. The amount of revenue foregone on this account alone is much larger than what the retirees can withdraw (and this includes the richest retirees as well) withdraw in any year.

It is inequitable for the government to forego large sums of tax from the rich Indians, but levy a retirement tax on the middle-class Indian.

Since the government is continuing to give EPF the tax benefit, it is imperative that the entire NPS corpus must be tax-exempt. If need be, it can be done by exempting from tax the pension received through the NPS corpus. The revenue loss is, in any case, spread over a number of years and will be made up by the boost to financial savings in the system.

Incidentally, even the 40 per cent exemption benefit is applicable only for employees and not for self-employed taxpayers. There is no earthly reason for this exemption to be denied to self-employed taxpayers and the government should correct this anomaly at the earliest.


Wednesday, March 09, 2016

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EPF tax withdrawn: How the controversy rendered NPS more attractive

Finance minister Arun Jaitley on Tuesday withdrew the controversial tax on employees provident fund after the middle class outrage threatened to synge the government badly. However, the positive outcome of the whole controversy is that the National Pension Scheme has become more attractive for investment.

The proposal that was announced in the Budget 2016 was to tax 60 percent of corpus of a private sector employee's EPF corpus, if he or she does not invest the amount in annuity schemes. If 60 percent is invested in annuity, the entire EPF corpus will become tax-free. The move was aimed at forcing private sector employees to invest in retirement schemes.

Whatever the government's intention was, the move rubbed the salaried class - the Narendra Modi government's hard core constituency - the wrong way. As the outrage heightened, trade unions, including the RSS-affiliated Bharatiya Mazdoor Sangh, called for a nationwide strike on 10 March.

It is in response to this Jaitley made the announcement to withdraw the tax proposal on Tuesday.
"In view of representations received, the government would like to do a comprehensive review of this proposal and therefore I withdraw the proposal," Jaitley said in a suo motu statement in Lok Sabha.

"Employees should have the choice of where to invest. Theoretically such freedom is desirable, but it is important the government to achieve policy objective by instrumentality of taxation. In the present form, the policy objective is not to get more revenue but to encourage people to join the
pension scheme," Jaitley said explaining the rationale for the taxation proposal.

While the middle class protested saying it is unfair to tax one's retirement funds, there were also views that the proposal may not be all that bad since the intention was for the tax-payer's good.

However, as said earlier the whole controversy has made the NPS has become a little more attractive for the common man. This is because Jaitley also announced on Tuesday that 40 percent exemption given to the NPS subscriber at the time of withdrawal has not been withdrawn. The proposal to make 40 percent of withdrawal from the NPS at the maturity to be made tax-free.

"EPF will hence continue to be an attractive investment option with an EEE scheme. The icing on the cake is that the exemption provided for 40% withdrawal from the NPS corpus still remains.

The NPS scheme would hence now move from a EET scheme to a partially exempt scheme at the time of withdrawal making this more attractive,” said Tapati Ghose, partner, Deloitte Haskins & Sells LLP.

Decoding the latest announcement Alok Agrawal, senior director, Deloitte Haskins & Sells, said that the employer’s contribution to PF in excess of Rs 150,000 per annum should continue to be non-taxable so long as it is within 12 percent of salary.

Withdrawal from these funds will continue to remain fully tax exempt subject to the existing conditions (e.g. 5 years’ continuous service for PF exemption).

However, he also points out there is a lack of clarity even in the latest announcement. "With this announcement, it is not clear whether the non-taxable limit for employer’s contribution to superannuation funds would be increased from the existing limit of Rs 100,000," he said.

He also concurs with Tapati that NPS will become more attractive.

"The proposed tax exemption up to 40% of amount withdrawn will help in making the scheme more popular," he said.

"The fact that this exemption/ deduction is over and above the EPF tax benefit is particularly relevant to those individuals who may have withdrawn their EPF balance at the time of changing jobs in the past or leaving India for an international assignment.

If such individuals are employed in India again, they would certainly consider investing in NPS (in addition to their ongoing EPF) to help them in beefing up their retirement fund," he said.

However, he said a clear picture will emerge only once the finance minister tables the amended Finance Bill before the Parliament.


Thursday, January 07, 2016

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eNPS-Online Subscriber Registration and Contribution Facility under NPS developed

In light of the Prime Minister’s “Digital India” campaign on promoting e-governance for providing last mile connectivity through extensive use of ICT (Information and Communications Technology) platforms, Pension Fund Regulatory Development Authority (PFRDA) has been pursuing the development and operationalization of online transaction facilities for the prospective as well as existing subscribers of NPS. Towards this end, an online platform for registration of subscribers and receipt of contribution under National Pension System (eNPS) through NPS Trust at has been developed. Through this platform, a prospective subscriber can register for NPS; contribute to his/her Permanent Retirement Account. Further, the subscribers who already have an NPS account can make contributions through eNPS directly.

A prospective subscriber can visit NPS Trust website and select NPS Online menu to register and contribute to NPS.

While registering, a Subscriber will provide his/her name & Permanent Account Number (PAN) details which will be validated online with the Income Tax Department. Subscriber will then select the Bank (through which KYC verification to be done), fill up the personal details and upload photograph & signature. After filling up of details, the Subscriber will make contribution through net banking from the account of the selected Bank. Once payment is made, PRAN will be provided online to the Subscriber. The details submitted by the subscriber will be sent through CRA system to the selected Bank for KYC verification. After verification of KYC by the Bank, the PRAN will become active and operational. Subscriber will be required to print the form, paste photograph, affix signature and submit the physical form to CRA within a specified period while continuing contributing online.

Subscriber can make subsequent contribution online through net banking /debit card/credit card at any time and the same will be credited in the subscriber’s PRAN account on T+2 basis.

The complete information about eNPS is available in PFRDA website and also on NPS Trust

Presently, ten banks viz. Allahabad Bank, Bank of India, Bank of Maharashtra, Oriental Bank of Commerce, South Indian Bank, State Bank of Travancore, State Bank of Hyderabad, State Bank of Patiala, Tamilnadu Mercantile Bank and United Bank of India have provided the facility of online KYC verification. PFRDA has advised all other Bank POPs to join the eNPS platform and provide online verification of KYC for the customers of their Banks willing to open NPS account online.

Through this facility, it is expected that the subscriber will have multiple advantages like seamless on boarding experience where he need not visit a Point of Presence and can register from anywhere through an internet connection, contribution with minimum cost of transaction and reduction in errors resulting from various manual activities.

Currently, NPS has more than 1.13 Crore subscribers with total Asset under Management (AUM) of more than Rs. 1.08 lakh crore.


Saturday, December 26, 2015

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Prabhu seeks pension scheme exemption for railways workers

Unions are drawing a parallel with the nature of duties performed by the armed forces.

Union Railways Minister Suresh Prabhu has urged Finance Minister Arun Jaitley to consider a long-pending demand of Railways employees to exempt them from the National Pension Scheme just like the defence forces.

“May I request you to kindly have a re-look into the case sympathetically and consider favourably the demand of the Railway Federations to exempt Railway employees from the purview of NPS,” the minister wrote in a letter last month, adding there was strong merit in the case.

Mr. Prabhu said railway unions had been drawing a parallel with the nature of duties performed by the armed forces, which are exempt from the NPS at present.

Mr. Prabhu informed the All India Railwaymen’s Federation (AIRF) about his submission to the Finance Minister at a meeting on Wednesday.

The Minister recently also said that he was in discussion with the Finance Ministry seeking additional help to meet the ‘unbearable burden’ of the Seventh Pay Commission’s recommendations.

Mallikarjun Kharge, the Railways Minister in the previous government, had also raised the issue with the then Finance Minister in March 2014.

However, the Ministry of Finance, through a letter written in May this year, didn’t agree to the proposal to exempt railway workers from the purview of NPS.

Every central government employee appointed on or after January 1, 2004, has to face a deduction from his or her salary (10 per cent equal contribution from the employee and the employer) toward the NPS, which is a defined contribution scheme, instead of the defined benefit scheme that prevailed earlier.

Prior to 2004, government employees, including 1.4 million employees in the Railways, were entitled to a fixed pension linked to their final salary at the time of their retirement.


Monday, October 26, 2015

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Exemption of Railway employees from New Pension Scheme/National Pension System (NPS)-NFIR

National Federation of Indian Railwaymen
3 Chelmsford Road, New Delhi – 110055


Dated : 24/10/2015

The Suresh Prabhu,
Hon’ble Minister for Railways
(Railway Board)
Rail Bhavan
New Delhi

Respected Sir,

Sub: Exemption of Railway employees from New Pension Scheme/National Pension System (NPS)-reg.

Ref: GS/NFIR’s letter No. IV/NPS/PFRDA BILL dated 26/08/2015 addressed to the Railway Board (MS).


The Government of India had introduced New Pension Scheme (NPS) applicable to the Central Government employees appointed on or after 01/01/2004. Under the scheme, 10% of the Pay of each employee is deducted from his/her salary every month and equal amount is contributed by the employer and credited to the NPS Trust controlled by the PFRDA. However those who were appointed prior to 01/01/2004 have been covered under Liberalized Pension Scheme and their pensionary benefits like Pension, Family Pension etc., are guaranteed by the Government. While the New Pension Scheme now being re-named as National Pension System is not applicable to Defence Forces, the same had unfortunately been made applicable for Railway employees with effect from 01/01/2004.

2. The duties, responsibilities, risk involved, remoteness, arduous and hazardous conditions of railway employee are akin to that of Army Personnel and therefore NFIR has been urging upon the Government as well the Railway Ministry to exempt Railway employees from New Pension Scheme. The Federation was compelled to take strike ballot on pending demands, among them Abolition of New Pension Scheme was one of the most important issues. Responding to the demands, the Railway Board (CRB, MS, FC) had held separate meeting with the Federations on 7th February 2014, wherein the justification for exempting railway employees from New Pension Scheme was discussed, consequently the Railway Ministry had agreed to approach the Government. Hon’ble MR Shri Mallikarjun Kharge had sent communication to the Finance Minister on 29th March, 2014 explaining case and justifying that the Railways deserves to be exempted from NPS. Unfortunately, there has been no positive decision from the Government till now.

3. In this context, NFIR also brings to your kind notice that the JCM (Staff Side) as well the Federations have decided to launch industrial action as the Government has not responded to the charter of demands of Central Government employees. During the meeting with you on 6th August,20l5, we have also mentioned some of the issues continued unresolved when CRB and Member Staff were present.

Railway Board (CRB, NPS & FC) held another meeting with the Federations on lst October 2015 on eight short listed demands which include Exemption of Railway Employees from New Pension Scheme. After discussions, the Railway Board has agreed to pursue the case with the Government again. In this connection, NFIR has earlier sent a communication with full details to the Railway Board (MS) vide letter No. IV/NPS/PFRDA BILL dated 26/08/2015 (copy enclosed) to facilitate Railway Ministry to prevail upon the Government to grant exemption to Railway from NPS. Federation is confident that the Railway Ministry is taking necessary action on the inputs given by the NFIR for presenting the case before you.

4. It is, however, shocking to note that a notice has been issued by the National Pension System Trust (NPS Trust) to all the subscribers under NPS that the Trust will start recovering fee/charge @ 0.01% of the AUM on daily accrual basis to meet its expenditure w.e.f. 1st November 2015. (Copy of Notice dated 19/10/2015 is also enclosed) This provocative and arbitrary decision has generated deep sense of disappointment and anger among railway employees

In view of the above, NFIR invites your kind attention to the communication dated 29th March 2014 of your predecessor (Shri Mallikarjun Kharge) to the Finance Minister and in-puts given by the Federation vide letter dated 26/08/2015 for taking special initiative at the level of Government for exempting Railway employees from New Pension Scheme (NPS) as a special case.

With regards.
Yours Sincerely
General Secretary


Thursday, September 17, 2015

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PFRDA pitches for investing 50% pension funds in stock mkt -NPS NEWS

Currently, the proposal is lying with the government for consideration and PRFDA is actively following it, he said.

Contractor said it is one of the recommendations of the G N Bajpai committee stating the investment of pension funds into stocks market should be enhanced. Pension fund regulator PRFDA Wednesday asked the Centre to raise the limit of government employees' pension funds in the stock market up to 50 percent.

The pension funds under PFRDA is allowed to invest only up to 15 percent of the corpus into stocks market. "We want that state and central government employees should be allowed to invest more in equity. They should also get the same exposure to the stock market as the employees of private sector get which is at 50 percent," PFRDA Chairman Hemant G Contractor said today.

 Currently, the proposal is lying with the government for consideration and PRFDA is actively following it, he said. Contractor said it is one of the recommendations of the G N Bajpai committee stating the investment of pension funds into stocks market should be enhanced.

Pension Fund Regulatory and Development Authority (PFRDA) had set up an expert panel under the chairmanship of ex-Sebi chief G N Bajpai to review investment guidelines for national pension system (NPS) schemes in private sector. On the rationale behind the proposal, the Chairman said equity in the long run is always better performing than other instruments.

The committee has recommended diversifying investment portfolio of NPS scheme into private equity and venture capital funds. PFRDA regulates NPS, which is subscribed by employees of both central and state governments, besides private institutions and unorganised sectors. At present, NPS funds can be invested in government securities, corporate bonds and equities.

The Centre had introduced the New Pension System (NPS) in January 2004. Total assets managed under NPS are about Rs 82,000 crore, while the private sector's contribution is just Rs 5,000 crore.


Saturday, August 29, 2015

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Exemption of Railway employees appointed on or after 01/01/2004 from the application of National Pension System(NPS)

National Federation of Indian Railwaymen

Affiliated to :


The MemberStaff,
New Delhi

Dear Sir,

Sub: Exemption of Railway employees appointed on or after 01/01/2004 from the application of National Pension System(NPS)- reg.

Ref: (i) MS’s do. no. 2012/F(E)III/1/4Pt. dated 04/03/2015 addressed to the Secretary, DoP&T, North Block, New Delhi.
(ii) Adviser, MoF (Department of Financial Services) New Delhi do. no. 08-01/2014-PR dated 15/05/2015.
(iii) Railway Board’s letter No. 2015/E(LR)II/ 13/3 dated 28/07/2015.

Kind attention is invited to the meeting held by the Federations with the Board (MS) on 20th July 2015 on 6 important issues raised by the Federations in their joint representations dated 19th May & 07th July 2015. Also attention is invited to the record note of discussions held on 20th July 2015 vide item no. 2 - “Exemption of Railways from New Pension Scheme-Hon’ble Minister for Railways sent proposal to Finance Minister on 29th March 2014 and thereafter the Railway Board has sent reminder to the MoF.”

In the meeting held on 2oth July 2015, the Railway Board (MS) has made available to the NFIR a copy of reply dated 15th May 2015 received from the department of financial services and suggested that the Federations may study the same and get back. However, on perusal of the contents of reply sent by the Adviser, MoF, the Federation felt disappointed that the points brought out by Hon’ble MR through his D.O. letter dated 29th March, 2014 have not been given weightage by the Finance Ministry. In this connection, NFIR places below vital points which require reconsideration for reviewing the case by the Government of India:-

Indian Railways is the complex transportation system fully owned by the Government.
The Indian Railways plays crucial role in economic growth of the country, ensuring transportation of various commodities including food-grains, perishables besides eco-friendly transportation of passengers. The services provided by Indian Railways also include rapid movement of army and the para-military forces from one comer to another in the times of crises and when the security of the country is at stake.
The role of Indian Railways thuscannot be underestimated under any circumstances.

2. The New Pension System (NPS) introduced by the Government of India has not been made applicable to the following services/states:-

(a) Personnel in Armed Forces,
(b) Personnel working in para-military establishments,
(c) West Bengal, Kerala & Tripura States.

3. As stated by the Ministry of Finance in its reply, the Government has been able to extend the “benefit of gratuity, invalid pension, family pension, disability pension and extra-ordinary pension on par with the liberalized pension scheme only provisionally”, itself establishes that prima-facie the demand of the Federation seeking coverage of Liberalized Pension Scheme to the Railway employees appointed on or after 01/01/2004 is genuine and merits consideration.

It is worth-mentioning that though the Indian Army fights war once in decades, the Railway employees face war situations in their day-to-day working viz derailment, accidents, breaches, bandhs, civil disobedience movements, inclement weather conditions etc., and always provide backup support in maintaining supply line. In support, Federation desires to cite following extracts from the report of “The. Railway Safety Review Committee 1998” - Part-I headed by Justice HR Khanna, Retired Supreme Court Judge:-
“During the colonial period, the Railways was conceived and operated as an auxiliary wing of the Army, primarily because it provided the transport muscle that enabled rapid movement of troops across the Indian sub-continent. There was, however, another less visible but important reason for the close linkage with the Army. The colonizers realized that the Railways, by virtue of its complex nature, required a high degree of discipline and efficiency to be able to perform its role as the prime transport mode. This, in turn, meant a system of working more closely allied to the ArmedForces than the sometimes lax civilian forms. Thus historically, Indian Railways (IR) has functioned differently from other Government Institutions.”

In the report, the Justice Khanna had further stated that it is not only unrealistic but also dangerous to treat the Railways and its problems on par with other Government departments which has unfortunately been the case with the Indian Railways post independence.

4. Apart from above, Federation desires to mention that the working of the Indian Railways is quite unique in its nature and distinctive in character. A lot of challenges are required to be faced to make the railway system safe, reliable, efficient and capable of fulfilling the needs of not only of public through transportation of passengers and other products like Iron ore, fertilizers, minerals, food-grains etc., but also ensuring security of the country by reaching the Nation’s borders. During the course of performance of duties a number of Railway employees lose their lives and also sustains injuries like Military and para-military forces. The report submitted by the High Level Safety Review Committee, comprising of Technocrats and Specialists in the field led by eminent scientist Dr Anil Kakodkar had highlighted following figures in respect of railway employees Vis-a-vis passengers/general public killed and injured during the year 2007/08 to 2011:-

                                 Killed                    Injured
(a) Railway employees 1600                   8700
(b) Passenger/Public 1019                    2110
(c) Unmanned Level crossing 723                     690

The above position is sufficient to prove that the working of Railway staff cannot be treated as less arduous than the Military and Para-military personnel and there is need that Railway employees joined in service on or after 01/01/2004 are exempted from the application of New Pension Scheme, presently called National Pension System and they should continued to be governed by the Liberalized Pension Scheme (called as Railway Services (Pension) Rules, 1993) or Railway Services (Extraordinary Pension) Rules, 1993.

5. The uniqueness of Indian Railways and the crucial role played by the Railway employees in providing uninterrupted services for 24 hours a day throughout the year can be gauged from the following factors which cannot be ignored under any circumstances:-
hazards induced by job environments, working conditions and capital health which are totally uncommon. These conditions prevail only in Armed Forces,
Rigorous medical standards, periodic updating of skills, workforce to prepare itself to match with changed technological up-gradation-Unique to Railways.
Railway employees job profile have built in integration of performance-cum-safety, execution-cum-self certification besides extended duty hours demanded by critical operational regime,
Like Armed Forces, the Railway employees are expected to remain at their Headquarters/ Stations even while availing periodic rest and they should report to duty in exigency or emergency and in the event of any untoward eventuality. Without prior permission they cannot leave Headquarters even during Rest Day. This system is not prevailing in any other Central Government Organization,
Even when ‘they avail leave, they are expected to give the ‘address on leave’ facilitating the Railway management to summon them to take up duty at a short notice. This is akin to that of Armed Forces.
Railway employees are expected to rise to the occasion in the event of any crisis like accidents, floods, sabotage etc., voluntarily even while on leave and assist the system.
The above provisions are in-built in various Rules laid down by the Railways.

5.1 The uniqueness in duties performed by the Railway employees are unmatched & second to none, is that the employee has to continue on duty and to wait for his reliever to take charge and he is not expected to leave the post although duty hours are completed unless and until his reliever reports and takes charge, e.g. Train Controller, Station Master, Electric Signal Maintainer, Technical staff, Loco Pilots, Guards, Points Men, Technical Supervisors etc. Thus their nature of duties is similar to that of defence personnel.

5.2 The Railway employees are exposed to risks in the course of performance of their duties as listed below:-

While performing duties whether running the trains, maintaining Tracks/S&T assets and attending to under-gears of the rolling stock (the staff sneak in between two rails, for maintenance purpose for ensuring train formations fit to run).

Continuously working under open Sky, in remote/jungle areas facing inclement weather conditions, susceptible to air pollution and high decibel noise which are unique so far as hazardous working conditions faced by vast majority of railway employees similar to the conditions faced by army personnel during conflicts with enemy.

Vast majority of Railway employees work at remote places, jungle areas and road side stations where amenities and living conditions do not exist - this is similar to that of Defence forces,
Nature of Railwaymen’s working is against cultural harmony, biological clock i.e. round the clock working in shifts, continuous night duties resulting into irregular living like that of military/para-military personnel.

Railway employees are exposed to attacks by anti-social elements in the course of performing duties similar to the situations faced by para-military staff,

Railway employees are liable for criminal prosecution in case if accidents as their duties are connected with the movement of trains round the clock with high degree of,safety standards while ensuring punctuality - a peculiar situation which is not faced by the staff of any other Ministry/Department of Central Government,

The duties of Railway employees are strenuous as Indian Railways is an operational transportation network. Continuous stress and strain in the course of performing duties has been resulting in health hazards like Hyper-tension, diabetes, Ulcer, Cardiac problems leading to premature deaths, medical invalidation at a scale larger than Armed/para-military forces. It is reported that the number of deaths while on duty or in service or on leave/sick is nearly 10000 per annum. This alarming number of deaths is due to various difficult and unbearable working conditions.

Rail work force are expected to possess quick reflexes like that of armed forces for ensuring safe and efficient train operations.

The dedicated and devoted services of Railway employees is a real contributing factor for running this important transportation system efficiently without dislocation. The earnings generated by the Indian Railways due to continued efficient services of employees of all categories have not only resulted in substantial improvement of this massive transportation system but also made I.R., to meet the expenditure towards staff wages, allowances, pension liabilities etc., without depending upon Central Government, thus proved capable to absorb these commitments from its own resources.

The country as well as the Indian Railways should feel proud of its work force which has been working relentlessly for providing satisfactory services to the Customer. Healthy Industrial Relations have been built by pursuing mutual trust and co-operation among the staff of all categories as well as the management during the last 40 years. Not a single man-day has been lost on employees’ account during the last four decades period in the Railways due to disciplined
work culture inbuilt among the employees.

The New Pension Scheme has unfortunately resulted into disappointment and frustration among railway employees. This issue needs to be addressed for ensuring equal justice to all employees irrespective of their date of appointment whether they are pre 01/01/2004 or post 01/01/2004. Withdrawal of New Pension Scheme in Railways would contribute for preserving healthy industrial relations and contribute for improved efficiency and best operating ratio.

NF IR, therefore, requests the Railway Ministry (MS) to kindly impress upon the Finance, Ministry, DoPT and DPPW the need to take action for exempting Railway employees from National Pension System (NPS). Hon’ble MR may also be apprised of the communication sent by his predecessor to the then Finance Minister seeking exemption for Railway employees from NPS to facilitate his intervention early.

Yours faithfully,

(Dr. M. Raghavaiah)
General Secretary

Source: NFIR

Thursday, August 20, 2015

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Grievance redressal policy under National pension System in r/o PC of A (Fys)


10-A, S K BOSE ROADM KOLKATA – 700 001


Ph- 033-22488878/5077-5080(Ext-665), Fax-03322480991, e-mail

Grievance redressal policy under National pension System in r/o PC of A (Fys)

Office of the principal controller of factories has been envisaged to control the functioning of forty one branch AO under 9 Group controllers. The following PAO comes under purview of this office as being pr.PAO so far as NPS is concerned. The main aim/objective behind the creation in factory organization is to render efficient, correct, prompt accounting and payment services besides financial/expertise services to factory management and OFB Authorities.

Government of India has introduced a New Pension Scheme replacing the defined benefit pension scheme. The New Pension Scheme comes into operation w.e.f from 01.01.2004 and applicabel to all new entrants of Central Government Service on or after 01.01.2004. The New Pension Scheme is working on defined contribution basis and will have two tiers-Tier-I and Tier-II. Tier-I is mandatory for all Govt. Servants/employees of autonomous institutes. In Tier-I government will have to make a contribution of 10% of the Basic pay, DP and DA which will be deducted from his salary bill every month. Government will make equal matching contribution and will deposit the same in non-withdrawal pension Tier-I account.


Under NPS system Branch Accounts Offices are termed as “Pay Accounts Offices (PAO)”, As a Central Govt. Office, the correct and timely deposit of contribution in Tier-I account by the respective Branch Accounts Offices (PAOs) is the prime concern. As a part of PFRDA (Redressal of Subscriber Grievance) Regulation, 2015, every intermediary is required to follow the Grievance Redressal policy. Accordingly, the below stated Grievance Redressal policy (GRP) is made for prompt redressal of the grievances arising out of various services offered by the Branch Accounts Offices in the capacity of intrmediary. The scope of this GRP is restricted to redressal of grievances raised against intermediary.

The term “Grievances”is defined as “Grievances of complaint”includes any communication that expresses dissatisfaction, in respect of the conduct or any act of omission or commission or deficiency of service on the part of Branch Accsilnts offices, an intermediary and in the nature of seeking a remedial action but do not incrude following:

(i) Complaints that are incomplete or not specific in nature;

(ii) communications in the nature of offering suggestions:

(iii) Communications seeking guidance or explanation.

(iv) complaints which are beyond the powers and functions of the PAOs/Pr.AO or beyond the provisions of the PFRDA Act and the rules regulations framed there under; and

(v) complaints that are subjudice (cases which are under consideration by court of law or quasi-judicial body) except matters within the exlusive domain of the PFRDA under the provisions of the Act.


The purpose of this policy is to set forth the policies and procedures to be followed in receiving, handling and responding to any grievance against the concerned PAOs in respect of the services offered by them. The following are broad objectives for handling the customer grievances.

1. To Provide fair and equal treatment to all employees of respective Factory/Branch Offices without bias at all times.

2. To ensure that all issues raised by employees are dealt with courtesy and resolved in stipulated timelines.

3. To develop an organizational framework to promptly address and resolve employees Grievances fairly and equitably.

4. To Provide enhanced level of satisfaction.

5. To provide easy accessibility to the employees of respective Factory/Branch offices for an immediate Grievance redressal.

6.To put in place a monitoring mechanism to oversee the functioning of the Grievance Handling Policy.
How to raise the grievance:- (Tier-I)

The subscribers can raise grievances through the following mode:

By raising a grievance in writing – in the specified format/letters/representation addressed to the Grievance Redressal Officer,PAO/Chief Grievance Redressal Officer, pr.AO.
Resolution mechanism for grievances:-

The grievance will be resolved by concerned PAO and then appropriate reply will be sent to the complainant by the PAO/Pr.AO.
Turn Around time (TAT)

Every grievance has to be disposed – Off by the PAO within a period of thirty days of its receipt at both the redressal tiers.
Grievance Redressal Officer (GRO) and chief Grievance redressal Officer (CGRO):-

The details of respective Grievance Redressal Officer (GRO) at PAO level are:

Sl.No Name and address
1        Shri Nabarun Dhar, IDAS
             Joint Controller of Accounts (Fys)

             Grienvance Redressal Officer (GRO), NPS

             O/O the PCA(Fys), AYUDH BHAVAN,

                 10-A S.K.Bose Road, Kolkara – 700 001.

              Phone No. (033) 22484341 Fax No. (033) 22480991.

                  Email address:

2 Shri Abhiram Mandal, IDAS
        Deputy controller of Accounts (Fys)

        Grievance Redressal Officer (GRO), NPA

         O/O the PCA (Fys), AYUDH BHAVAN,

        10-A S.K.Bose Road, Kolkata – 700 001.

        Phone No. (033) 22484341 Fax No. (033) 22480991.

3 Shri Vidhu Aggarwal, IDAS
       Assistant Controller of Accounts (Fys)

        Grievance Redressal Officer (GRO), NPS

       O/O the PCA(Fys), AYUDH BHAVAN,

       10-A S.K.Bose Road, Kolkata – 700 001.

   Phone No. (033) 22484341 Fax No. (033) 22480991

    Email address: vidhugupt

4 Shri Rajesh Kumar, Sr A.O.
       Grievance Redressal Officer (GRO), NPS

       O/O the AO OF NALANDA,

       Ordance Factory Nalanda(P), Rajgir 803121

       Phone NO. (06112) 257105 Fax No. (06112) 257102.

      Email address:

If the complainant is not satisfied with the refressal of his grievances or if it has not been resolved by Grievance Redressal Officer, concerned PAO by the end of thirty days of the filing of the complaint, he/she may escalate the grievance to the chief Grievance Redressal Officer (CGRO).
The present Chief Grievance Redressal Officer (CGRO) details are:-

Shri M.C.Chakrabortty, IDAS

Controller of Accounts (Fys),

Chief Grievance Redressal Officer (CGRO), NPS


10-A S.K.Bose Road, Kolkata – 700 001.

Phone No. (033) 22484341 Fax No. (033) 22480991

Email address:

The record of grievances will be maintained by the concerned Redressal Officer.


(Nabarun dhar)

Joint Controller of Accounts (Fys)


Friday, July 17, 2015

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PFRDA wants private fund managers to handle govt employees' funds

The Pension Fund Regulatory and Development Authority (PFRDA) is suggesting that the money in the government’s National Pension System (NPS) be also entrusted to private fund managers.

Sources close to the matter indicated it has written a letter in this regard to the government. The total of assets under management (AUM) under NPS is Rs 88,000 crore, of which the funds from central and state government employees are Rs 79,000 crore.

By present PFRDA regulations, only public sector undertaking (PSU) fund managers are allowed to manage the money of government employees. SBI Pension Funds, UTI Retirement Solutions and LIC Pension Funds handle these. Fund managers from the private sector are allowed to manage those of corporate employees and the unorganised sector. The pensions funds of HDFC, Kotak Mahindra, ICICI Prudential, Reliance Capital and Birla Sunlife Insurance managed a total of Rs 7,000 crore at the end of June.


PFRDA pitches for private fund managers to manage government employees funds
Currently, almost Rs 80,000 crore of NPS AUM is managed by PSU-backed funds, contributed by government employees
Funds of corporate and unorganised sector are managed by private fund managers such as HDFC and ICICI Pru subsidiary
Total funds under private fund managers stands at Rs 7,000 crore

The regulator thinks that because of the smaller AUM, private sector fund managers get less room to deploy the money. “They need to show a good rate of return, which is difficult to manage with small funds, as it gives them little flexibility,” said an official.

If these private fund managers get government funds, too, they would be incentivised to be committed to the sector and even government pension funds would garner better returns, another official felt.

While this would be good news for private fund managers, it would have an impact on the assets of PSU fund managers. As of end-June, the total being managed by SBI Pension Fund, also the default fund manager for NPS, was Rs 34,085 crore, of which Rs 27,945 crore was from the government sector. UTI Pension Fund handles a little less than Rs 23,000 crore and LIC Pension Fund about Rs 22,000 crore.

“We have not received any communication so far,” said SBI Pension Fund on PFRDA's reported move.

Some others say employees should be able to chose their fund manager. “They would make the decision based on the returns they are getting,” said one manager.

From data published on the PFRDA website, the average annual return offered by NPS over a five-year period is 11 per cent for both equity and corporate debt funds. In spite of a good return and being a defined benefit scheme, NPS has lagged other long-term investment products such as the provident fund, due to lack of the Exempt–Exempt –Exempt status. Meaning, your investment is tax-deductible, as is the return on the accumulation, beside being also tax-free at the time of withdrawal.

NPS, however, is Exempt-Exempt-Taxed. The corpus from an NPS account, once received, is taxable under the appropriate bracket. PFRDA has been seeking the EEE status, to bring it at par with other such instruments.

Last month, PFRDA revamped the investment guidelines for government funds by allowing these to get into real estate investment trusts and infrastructure investment trusts, beside reducing their exposure limits to government bonds.


Wednesday, March 11, 2015

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NPS: Govt staffers may go for higher equity exposure

  Breaking away from the traditional pension fund management system for government employees, the Pension Fund Regulatory and Development Authority (PFRDA) is planning to provide them with a variety of investment options where they can park their funds, including a choice to deploy 50 per cent of their contribution into equities. This will be a marked change from the current default scheme that allows up to 15 per cent of contribution to be invested into equities.

Whole-time member (Finance) of PFRDA, RV Verma, said that the authority is looking to migrate to a situation where the subscriber (a government employee) of the National Pension System (NPS) will be able to choose the investment options.

“We have taken the proposal to our board and its views are being reviewed. The idea is that if a subscriber can make a decision then why not give him/her the option. Those who can take a decision on their investments and can read the markets should not be deprived of the option of getting a better yield on their investments,” said Verma.

Though the PFRDA has already started work on this and it may take some time, Verma said that it also has to be discussed with the government. “Though the government is there to take decision on their behalf, if anyone wants to take decision on their own or they can be enabled to take the decision then why not,” emphasised Verma.

As of now, there is only one default scheme for government employees and the fund is allocated to SBI Pension Funds, UTI Retirement Solutions and LIC Pension Fund in a predefined proportion. Also, the money has to be deployed in a set pattern — up to 55 per cent in government securities, up to 40 per cent in debt securities, up to15 per cent in equities and 5 per cent in money market instruments.

However, ‘all citizens model’ of the NPS allows investors to pick from one of the three options — predominantly equities (E), fixed income instruments other than government securities (C) and into government securities (G). With PFRDA looking to provide options, government employees will be able to invest into E asset class where up to 50 per cent of their contribution can go into equities.

While the total AUM of the contribution from all government employees (Central and state) stood at Rs 69,476 crore as of January 2015, the annual additional contribution amounts to around Rs 20,000 crore (around Rs 7,000 crore from the Central government and Rs 13,000 crore from state governments). Once the move turns into a reality, it will be a big booster to the equities market as close to Rs 20,000 crore would flow in as investments every year.


Sunday, March 08, 2015

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Is NPS better than EPF?

The NPS is more complicated than EPF, but it may ensure a sufficient retirement kitty

If there’s one investment option that has received generous tax breaks in the Budget, it is the National Pension System (NPS). In a watershed move, the Finance Minister has also announced that employees in the organised sector will now be able to opt out of contributions to the Employees Provident Fund (EPF) and invest in the NPS instead. So, if given this choice, what should you do? Here’s how they compare.

EPF contributions are mandatory for employees earning up to ₹15,000 a month in the organized sector. Many employers however insist on EPF contributions for all their employees. The contribution is pegged at 12 per cent of your pay (basic plus dearness allowance). Your statutory EPF contributions are matched by your employer. If you are an employee who usually struggles to save, the EPF is a good option for you as it forces you to save at least 12 per cent of your pay.

But if you are targeting a comfortable retirement, note that EPF alone won’t be enough as it is pegged only to your basic pay. The NPS is a voluntary account; you can contribute anything starting from ₹500 a month (₹6,000 a year).

To avail of the tax breaks on the investment, the maximum limit is ₹2 lakh a year. Unlike the EPF, the NPS allows you to skip contributions for a few months if you can’t afford it (investing once a year is mandatory).

So, the NPS scores over the EPF on two counts — you can save much more and do it with greater flexibility. But currently all your EPF contributions are matched by your employer. Not so for the NPS.


The money you pay into EPF is invested in ultra-safe options — Central and State Government securities, bonds and deposits from PSUs and a special deposit scheme from the Government. Last we know, G-Secs made up 40 per cent of the portfolio, PSU debt 32 per cent, with the deposit making up the rest of the EPF kitty. The EPF doesn’t actively manage its portfolio — it mostly buys and holds till maturity. This makes for low but predictable returns.

The key differentiator with the NPS is that it allows you to add an equity component to your retirement kitty. You also get to flexibly allocate your money between equities (up to 50 per cent), liquid funds/bonds and Government Securities (G-Sec) in any proportion you like.

You also have the choice of deciding who, among the six pension fund managers, will manage your money. Their individual track records are available on their websites.

You can rejig allocations once a year and also change your fund manager. Both the equity and the debt portions of the NPS have delivered double-digit returns in the last one year. But because they are invested in market instruments, your returns will fluctuate from year to year.

The G-Sec portion, for instance, delivered negative returns during the rising rate scenario, but is faring well with falling rates. Given that you are looking at the NPS as a long-term option, you need not worry too much about shorter term losses in the debt portfolio. Due to its portfolio structure, the NPS is likely to earn higher returns but with greater variability.


The interest you earn on your EPF account is decided by the EPF trustees who announce the rate every year. In the last four years, interest rates have been 9.5, 8.25, 8.5 and 8.75 per cent, respectively.

The returns on NPS depend on your asset allocation as well as choice of fund manager. If you choose a 30-50 per cent equity component, returns are likely to be in the double-digits, even assuming equities manage only 15 per cent a year and debt securities 8 per cent.


The EPF’s portfolio is not made public. But it is a government-backed scheme and the presumption is that it will not default on any payments. Returns are also announced and well-publicised.

With the NPS, you know exactly where it invests, with all the managers regularly disclosing their portfolios. But unlike the EPF, gauging NPS returns is not easy. Returns earned by different plans/managers are not available at one location. You need to compile them individually from the historical NAVs put out by the different fund managers.

So, the EPS is your best bet if you like to know exactly what you’re earning. The NPS works if you don’t mind leaving it to market forces.

The EPF allows you to withdraw your money before retirement if you resign from one job and take up another, after a gap. You can also draw money from it for constructing/buying a home, illness, marriage or education of children. You can use the sums withdrawn for these purposes.

In the NPS, if you withdraw before the age of 60, you need to compulsorily use 80 per cent of the proceeds to buy an annuity plan from an insurer. Even withdrawals after the age of 60 require you to use 40 per cent to buy an annuity. Only 60 per cent will be available to you to deploy as you please.

The EPF is certainly more flexible than NPS on early withdrawals. But withdrawing too much or too often can leave you short of a retirement kitty when you most need it.

Contributions to the EPF are tax-free under Section 80C. Interest earned and withdrawals aren’t taxed either, unless you do so within five years of starting the account.

Investments in the NPS, up to ₹2 lakh are tax-free. But the sums you withdraw at retirement are taxable at the prevailing income tax rates.


Monday, February 23, 2015

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New Website of National Pension System Trust Launched; To Provide Proper and Effective Information Dissemination to the Stakeholders and Provide Ease of Access to Various Beneficiaries Under NPS

The National Pension System Trust has been set-up and constituted by Pension Fund Regulatory Development Authority (PFRDA) for taking care of the assets and funds under the National Pension System (NPS) in the interest of the beneficiaries (subscribers).

The National Pension System Trust has launched its new website here today.. The website was launched by Shri G. N. Bajpai, Chairman & Trustee of the Board of NPS Trust. The website is aimed to provide proper and effective information dissemination to the stakeholders and provide ease of access to various beneficiaries under NPS.


Tuesday, January 27, 2015

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Clarification on Revision of Investment Guidelines for NPS Scheme issued on 29.01.2014

Date: 22nd Jan. 2015
All Pension Funds,
Subject: Clarification on Revision of Investment Guidelines for NPS Scheme issued on 29.01.2014

This is with reference to the Circular No. PFRDA/2014/02/PFM/1 for Revision of Investment Guidelines for NPS Schemes issued by PFRDA on 29.01.2014.

2. Pursuant to above mentioned circular, the Pension Funds were expected to realign their portfolios in accordance with the revised guidelines.

3. However in the interest of the subscribers the following was stipulated in clause 5.

“Pension Funds to ensure that the interest of the subscribers is safeguarded and that they should not incur any loss while exiting the existing investments to comply with the revised guidelines. However, all future investments should be made strictly in compliance with the above guidelines’

4. It is to clarify that the above clause was only intended to protect the subscriber any loss on exiting any existing security merely to comply with revised investment pattern

5. However this does not imply that Pension Funds cannot exit from existing investments at a loss, if it is so required as a measure of portfolio management by the Pension Funds within the parameters of their internal Investment Management/Risk Management/ Stop loss policy and within the overall framework of guidelines issued by PFRDA.

6. A case in the point is when there is downgrade of any security, it is for the Pension Funds to determine the point of exit from it. The guidelines do not bar any such exit even if there is a loss, if the exit is so determined by the policy of Pension Funds within the overall framework of PFRDA guidelines.

Sumeet Maur Kapoor
(General Manager)


Tuesday, January 13, 2015

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Pension funds come of age, give more returns than PF

NPS schemes for the general public have done well due to the recent equity and bond rallies
They reached late, but NPS (National Pension System) investors have finally joined the party in the capital markets. An analysis by ET shows that NPS schemes have generated better returns than the provident fund.

The average NPS fund for Central government workers has given 10.35% returns since launch, while the average state government scheme has delivered 10.84%.The NPS schemes for the general public have also done very well, thanks to the bullishness in the equity markets and the recent rally in bonds.

The average equity fund has generated 14.6%, while the corporate bond fund has given 10.6%. Gilt funds have given average returns of 9.9%. These calculations are based on SIP returns on monthly contributions from inception till December 2014.

The high returns should be music to the ears of the estimated 36 lakh government employees (14 lakh central government and 22 lakh state government) who have nearly ` . 53,500 crore invested in NPS. Three pension funds manage this gigantic corpus, which is almost 92% of the assets under management (AUM) of the NPS.

But the higher returns have been accompanied by greater volatility. The NPS funds did very well in 2012-13, but gave pathetic returns in the following year.

As bond yields shot up in 2013-14, the SIP returns of the average Central government fund was 5.4% while the average state government fund grew only 4.9%. The 18% returns from equities that year didn’t help much as these funds had only a small portion of their corpus in stocks.

Average Returns in (%)
Year       Central Govt NPS         State Govt NPS
2012-13      9.76                             11.82
2013-14      5.37                                4.96
(Up to Dec)19.63                            20.08
From Launch of NPS 10.35 10.84

The Pension Fund Regulatory and Development Authority (PFRDA) allows NPS managers to invest up to 15% in equities, but no pension fund manager has ever hit that ceiling. As on November 30, 2014, the central government scheme of UTI Retirement Solu tions had only 11.48% in stocks, while the fund managed by SBI Pension Fund had allocated only 8.25% to equities.

“The unsaid benchmark use for the central government NPS is the EPFO rate of return. Therefore, PF managers keep a lower allocation to stocks. But this compromises the long-term return potential of the scheme. They should ideally increase the exposure to equity ,“ says Manoj Nagpal, head of mar keting and business development at Zyfin Advisors and founder CEO of Outlook Asia Capital.

Despite the conservative allocation, NPS funds have given good returns in the first nine months of 2014-15. This is due to the bond rally in 2014. The 10-year benchmark bond yield fell 135 basis points — from 9.1% in April 2014 to around 7.8% by the end of 2014 — pumping adrenaline into the NAVs of funds overweight on government bonds. The average SIP return of the gilt funds in 2014-15 is close to 22%, better than the 20% delivered by the equity funds in the period.

In the NPS segment for the private sector, the E class (equity) funds have done well with average SIP returns of 14.6% since the scheme was thrown open to the public in May 2009. ET looked at the returns of four types of investors in the past three fiscals and since launch (see table).

Interestingly, ICICI Prudential Pension Fund has been the best performing pension fund for all four investor types. Kotak Pension Fund and SBI Pension Fund are tied for the second position.


Wednesday, November 19, 2014

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Number of Subscribers Registered Under National Pension System (NPS) -PIB

Number of Subscribers Registered Under National Pension Systemnps (NPS) has more than Doubled
Since April 2012 from about 11.5 Lakh to 23 Lakh:Chairman,Pfrda ; Number of States Joining NPS has Increased from 12 to 26 ; Pfrda Working Towards Notification of Various Regulations in Respect of Efficient Management of Funds, Seamless Grievance Handling and Systems for Risk Mitigation and Containment Among Others

Shri Hemant Contractor, Chairman, Pension Fund Regulatory Development Authority (PFRDA) said that the number of subscribers registered under National Pension System (NPS) has more than doubled since April 2012 from about 11.5 Lakh to 23 Lakh. He commended the substantial improvement in performance of State Governments since April 2012.. He said that the Asset Under Management has also increased 7 fold from Rs.3,300 crores to approximately Rs.24,000 crores while the average contribution upload per month has increased from Rs.180 crores to approximately Rs.900 crores. Shri Contractor was speaking at a Conference on Implementation of National Pension System (NPS) by State Governments organized here today by Pension Fund Regulatory Development Authority (PFRDA). The main objective of the Conference was to focus on progress of performance of the State Governments and also to discuss the implications of the passage and notification of the PFRDA Act for respective States who are offering NPS to their respective employees.

Shri Contractor, Chairman, PFRDA informed, that barring the two States, all the other State Governments, have notified joining NPS. Since the last such conference held in April 2012, the number of States joining NPS has increased from 12 to 26, he added. He said that PFRDA was in talks with the other two State Governments on their joining NPS.

Shri Contractor, Chairman, PFRDA, further said that with the passage and notification of the Act, PFRDA has been conferred with a statutory status. Its mandate covers development of the pension sector as also framing regulations for the advancement of the NPS and protection of the interest of the subscribers. He informed the participants that regulations under the Act are expected to be notified within the next two months. The Chairman added that steps have been taken for communicating more frequently with the subscribers to increase awareness levels about NPS. He directed the State Government officials to regularly visit the PFRDA website for updates on various policies and information. Shri Contractor added that there were various points of concerns which have to be dealt with proactively to protect the interest of the subscribers. He added that this conference and more in the coming years would act as a platform for discussion with PFRDA and interactions with other states to share their best practices.

Earlier speaking on the occasion, Dr. Anup Wadhawan, Joint Secretary, Department of Financial Services, Ministry of Finance emphasised upon the fact that NPS of the Central and the State Governments forms the backbone of the NPS as it is a direct replacement of the erstwhile DB pension system. Hence, its proper implementation is very important for the NPS product as well as the sector, he added. Dr. Wadhawan further stressed upon the fact that the State Government Nodal offices need to keep the information in respect of their employees like email ids, mobile numbers and addresses etc. updated in all respects at regular intervals. Dr. Wadhawan further asked the State Governments to sort-out the issue of legacy contributions and inclusion of State Autonomous Bodies in an expeditious manner. He further called upon the State Governments to further the cause of the Government of India promoted NPS Swavalamban scheme for economically weaker sections of the unorganised sector, through their respective Rural Development Departments.

Shri R V Verma, Member (Finance) laid emphasis on the fact that despite NPS being voluntary in nature; most of the State Governments have proactively adopted it. He further dwelt on the fact that the paradigm shift from the Defined Benefit to the Defined Contribution has put the subscriber’s interest at the centre and the involvement of the subscriber’s right from the entry into the system up to his/her exit becomes prominent. He mentioned that the involvement of the State Government Nodal offices, as the first point of interaction of the subscriber attains importance. He added that with the passage of the Act, PFRDA is working towards notification of various regulations in respect of the efficient management of funds, seamless grievance handling and systems for risk mitigation and containment. Shri Verma emphasised that various issues like expanding coverage, adequately safeguarding the interest of the subscriber and robust risk management system is of paramount important for protecting the interest of subscribers. He said that synchronization of information and funds is very important in NPS; hence Nodal offices have to lay emphasis on the same. He stated that it is the collective endeavour of the Regulator and the stakeholders involved i.e. State Governments, State Autonomous Bodies (SAB) and their Nodal offices, that a two way feedback process has to be in place to innovate upon the operational aspects of the NPS.

Though it is mandatory to register under National Pension System (NPS) for the joinees/employees of the Central Government who have joined or are joining it on or after 01-01-2004, yet most of the State Governments have adopted NPS voluntarily for their employees from their respective adoption dates. Currently, NPS has 76 Lakh subscribers with total Asset Under Management (AUM) of Rs.68,000 crores. Out of this, State Government sector has approx. 23 Lakh subscribers with AUM of Rs.30,000 crores.


Thursday, November 13, 2014

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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

YEARD.A. assumed
with 3% annual increment
(employee and Govt)
of Investments @


* 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:

(C) 40%   invested in an annuity scheme  which he / she can receive before 70 years:

(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 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.

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.