No Pension Scheme

What is the New Pension Scheme?

All Central Government employees, including Delhi University Teachers, how have joined permanent service on or after 1.1.2004 come under the New Pension Scheme (NPS). It covers both Pension as well as Provident Fund.

How is it different from the Old Pension Scheme?

OLD PENSION SCHEME:
A minimum of 10% of Basic Pay (BP) and Dearness Allowance (DA) is deducted from the salary and added to the Employee’s Provident Fund (EPF).

NEW PENSION SCHEME:
A minimum of 10% of Basic Pay (BP) and Dearness Allowance (DA) is deducted from the salary and added to the Contributory Provident Fund (CPF). This is Teir-I contribution.

OLD PENSION SCHEME:
The employee can choose to get more amount deducted.

The employee can choose to get more amount deducted. This is Teir-II contribution.

OLD PENSION SCHEME:
The Employer (i.e. government) contributes nothing to the PF while the employee is in service.

NEW PENSION SCHEME:
The Employer contributes 10% (not more) of the employee’s BP and DA to the employee’s CPF.

OLD PENSION SCHEME:
The entire contibution of the employee is eligible for exemption for Income Tax purposes.

NEW PENSION SCHEME:
Only Teir-I contribution of the employee is eligible for deduction for Income Tax purposes.

OLD PENSION SCHEME:
The sum accumulated is invested in Fixed Deposit schemes in various Banks at attractive interest rates and the interest is added to the employee’s EPF account.

NEW PENSION SCHEME:
The sum accumulated is to be invested in Pension Funds (similar to Mutual Funds).
These Pension Funds may invest all or part of the amount in Stock Markets and the returns dependent on market movements.
Currently, the government has apponted the State Bank of India, ICICI Bank, Reliance and HDFC Bank as Pension Fund Managers. (After the current financial crisis do you trust the private banks or the stock market??)

OLD PENSION SCHEME:
During the service years an employee can take a loan of upto 75% from her EPF or withdraw upto 50% of the total accumulated amount on account of certain special expenditure like marriage of children or house construction.

NEW PENSION SCHEME:
The employee is awarded no withdrawal or loans against the Teir-I contribution or the Employer’s contribution.

OLD PENSION SCHEME:
At the time of retirement the entire accumulated amount is paid to the employee.

NEW PENSION SCHEME:
Only 60% of the total accumulated amount of Teir-I is paid to the employee at retirement. (That is if any amount is spared after the ravages of the stock market)

OLD PENSION SCHEME:
The pension of the employee is decided as the 40% of average of the BP for the last 3 months (prior to retirement). The pension paid to the employee will take into account the the increase in DA announced by the government from time to time.

NEW PENSION SCHEME:
The remaining 40% of the accumulated amount from the CPF is to be invested once again with the Pension Fund Manager and Pension paid by them. (That is even after retirement an employee has to depend on the vagaries of the market for her pension.)

Read More:

Features of the NPS

Social Security Benefits and the New Pension Scheme

Social Security at Stake


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