New Pension Scheme : Some clarifications..!

ADMINISTRATIVE STRUCTURE


The administrative setup of NPS subscription is planned as:



Employee>Paying officer>DDO>PAO>PrAO>PFRDA/CRA/NSDL>Trustee Bank>Pension Fund managers



IS THE NEW PENSION SCHEME GOOD?



If calculated,we can see that the new pension scheme employees are actually getting 10 % less pay than the old pension scheme staff.There is a wide spread rumour that the new pension scheme offers amount in Lumpsum amount and therefore it is better than the old pension scheme.How much truth is there in it?Let's see...



Please note:The below calculations are based on pay of a Group C cadre of scale 5200-20300(2500 Grade Pay) and if the government puts the whole investment in fixed instruments of 8% annual interest.The percentage of investments in equity which is speculated cannot be calculated.It purely depends on how efficient the appointed fund manager is.The principal amount of contribution without interest otherwise is:


Based on 10 years-210000(employee contribution)+210000(Govt contribution)=Rs420000

Based on 20 years-540000(employee contribution)+540000(Govt contribution)=Rs1080000



Therefore the amount of pension you get is purely based on the scheme you chose.As per now,there is no scheme which allows to put 100% in fixed instruments and the figures are just to compare.



Old and New Pension scheme comparison after completing 10 years(before 60 years)



CPF Calculation



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Contribution Amt.	year	Sub.+Bal.+8%Interest	Total Amt.
1300	i st year	15600 + 1248	16848
1400	ii year	16800 + 16848 + 2691	36339
1500	iii year	18000 + 36339 + 4347	58686
1600	iv year	19200 + 58686 + 6230	84116
1700	v year	20400 + 84116 + 8361	112877
1800	vi st year	21600 + 112877 + 10758	145235
1900	vii year	22800 + 145235 + 13442	181477
2000	viii year	24000 + 181477 + 16438	221915
2100	ix year	25200 + 221915 + 19769	266884
2200	x year	26400 + 266884 + 23462	316746

If equal government contribution also provides interest, Total tier-1 amount is 316746x2=Rs633492



80% in pension fund=506794


Amt you get at the time of retiring=Rs126698+Rs 3378 monthly pension (8% interest of Rs506794 in a pension fund)+no gratuity



For old pension scheme after 10 years


GPF =316746

Gratuity=110000[1/4*(last bp+da)*(10*2)]

Total amount= Rs426746+Monthly pension Rs 3500+da (minimum pension )



Thus Comparison of old and new pension scheme gives over Rupees 3 lakh less benefits in lump sum amount and lesser monthly pension for new employees after ten years of service for below 60 years retirement.






Old and New Pension scheme comparison after completing 10 years(reaching 60 years age)




If equal government contribution also provides interest, Total tier-1 amount is 316746x2=Rs633492



40% in pension fund=253396
Amt you get at the time of retiring=Rs380096+Rs 1689 monthly pension (8% interest of Rs253396 in a pension fund)+no gratuity



For old pension scheme after 10 years


GPF =316746

Gratuity=110000[1/4*(last bp+da)*(10*2)]

Total amount=Rs426746+Monthly pension Rs 3500+da (minimum pension )



Thus Comparison of old and new pension scheme gives over Rupees 50000 less benefits in lump sum amount and Rs 1800 lesser monthly pension for new employees after ten years of service for age 60 retirement.





Old and New Pension scheme comparison after completing 20 years(before 60 years)




CPF Calculation






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Contribution Amt.	year	Sub.+Bal.+8%Interest	Total Amt.
1300	i st year	15600 + 1248	16848
1400	ii year	16800 + 16848 + 2691	36339
1500	iii year	18000 + 36339 + 4347	58686
1600	iv year	19200 + 58686 + 6230	84116
1700	v year	20400 + 84116 + 8361	112877
1800	vi st year	21600 + 112877 + 10758	145235
1900	vii year	22800 + 145235 + 13442	181477
2000	viii year	24000 + 181477 + 16438	221915
2100	ix year	25200 + 221915 + 19769	266884
2200	x year	26400 + 266884 + 23462	316746
2300	xi year	27600 + 316746 + 27547	371893
2400	xii year	28800 + 371893 + 32055	432748
2500	xiii year	30000 + 432748 + 37019	499767
2600	xiv year	31200 + 499767 + 42477	573444
2700	xv year	32400 + 573444 + 48467	654311
2800	xvi st year	33600 + 654311 + 55032	742943
2900	xvii year	34800 + 742943 + 62219	839962
3000	xviii year	36000 + 839962 + 70076	946038
3100	xix year	37200 + 946038 + 78659	1061897
3200	xx year	38400 + 1061897 + 88023	1188320

If equal government contribution also provides interest, Total Tier-1 amount is 1188320x2=Rs2376640


80% in an annuity pension fund scheme=1901312


Amt you get at the time of retiring=Rs475328+Rs 12675 monthly pension (8% interest of Rs506794 in a pension fund)+no gratuity



For old pension scheme after 20 years


GPF =1188320

Gratuity= 320000 i.e. [1/4*(last bp+da)*(no of every completed six month of service)]

Total amount= Rs1508320+Monthly pension approax Rs 16000+da (half of last bp+da )



Thus Comparison of old and new pension scheme gives over Rupees 10 lakh less benefits in lump sum amount and Rs 4000 lesser monthly pension for new employees after twenty years of service for below age 60 retirement.





Old and New Pension scheme comparison after completing 20 years(reaching 60 years age)



If equal government contribution also provides interest, Total Tier-1 amount is 1188320x2=Rs2376640


40% in an annuity pension fund scheme=950656


Amt you get at the time of retiring=Rs1425984+Rs 6300 fixed monthly pension (8% interest of Rs950656 in a pension fund)+no gratuity



For old pension scheme after 20 years


GPF =1188320

Gratuity= 320000 i.e. [1/4*(last bp+da)*(no of every completed six month of service)]

Total amount=Rs1508320+Monthly pension approax Rs 16000+da (half of last bp+da )



Thus Comparison of old and new pension scheme gives over Rupees 1 lakh less benefits in lump sum amount and Rs 9700 lesser monthly pension for new employees after twenty years of service for age 60 retirement.




And some final questions:



1.The Government notifications only explains about giving a fixed pension with this amount through a annuity and not about giving this huge amount of money back to the employee at anytime.So what happens to the huge principal amount(19 lakh in the case of a VRS) when the pension ceases after the pensioner and his dependent's death?



2.Why doesn't the government give the whole money of contribution as on EPF for the employee at the time of retirement to invest in bank atleast and enjoy interest or his choice of investment?Why is the government putting restrictions of 40% and 80% to be only invested in annuity pension scheme without giving any other choice to employee's hard earned money?



3.Isn't it a violation of Payment of Gratuity Act-1972 when the employer,who is the Government of India,has decided to give no gratuity to new employees without passing the new bill?



4.While EPF provides loan upto 36 months of wage,there is no scope for any loan in CPF,the money is blocked until the employee retires.What should a new employee do in case of an urgent requirement for building a house or marriage of children?


Source: newpension