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Monday, April 22, 2013

Comparison between New Pension Scheme & Old Pension Scheme

Written By Admin on 21 April 2013 | Sunday, April 21, 2013

New Pension Scheme
(Defined Contributory Pension Scheme)


Presented by


JGS (Finance & Administration) /IRTSA

Pension - Greatly Valued
  • Pension is valuable in the sense that it is secure.
  • Supreme Court held that pension is a valuable right vested in a Govt. servant.
  • Refusal, reduction, forfeiture of pension not allowed unless on extreme conditions.
  • Pension is secured against attachment & seizure.

Defined Benefits Pension & GPF 

(prior to 1.1.2004)

  • Pension
  • Commutation of Pension
  • Retirement Gratuity
  • Death Gratuity
  • Service Gratuity
  • Leave Encashment
  • Family pension
  • Group Insurance

Types of Pension
(1) Superannuation
  • calculated as 50% of average emoluments of last 10 months salary drawn subject to the minimum of Rs.3500 and maximum of Rs.45000.
(2) Family Pension
  • At the rate of 30% of basic pay subject to the minimum of Rs.3500 and maximum of Rs.27000.
(3) Voluntary Retirement (VR )
  • Maximum of 5 years weightage in the Qualifying Service

  • Can commute a lumpsum payment not exceeding 40%.
  • Reduced pension in proportion to the % of commutation and age factor.
  • Commuted portion of pension shall be restored after the completion of 15 years.
  • Lumpsum amount received on commutation of pension is not liable for Income tax.
  • Dearness relief calculated to the original pension not on the reducedpension.

  • Retirement Gratuity: Admissible (along with pension) on retirement after completion of 5 years of qualifying service. 
  • Calculated @ 1/4th of a month’s Basic Pay + DA for each completed six monthly period of qualifying service. Maximum retirement gratuity payable is 16. times of emolument limited to Rs. 10 lakhs. 
  • Death Gratuity: Payable to the nominee in the event of employees death. 
  • Service Gratuity: entitled for service gratuity (and not pension) if total qualifying service is less than 10 years.

New Pension Scheme(Defined Contributory Pension Scheme)
Salient Features
  • Operational with effect from 1.1.2004.
  • Implemented by Central Government and 22 states. Existing provision of Defined Benefit Pension & GPF would not be available to new Govt. servants joining service on or after 1.1.2004.
  • Will have tiers – Tier-I & tier-II.

  • 10% of BP+DA contribution by the Govt. servant every month.
  • Equal matching contribution by the Government.
  • Kept in the non-withdrawable Pension Tier-I account.
  • Tier-II voluntary contribution will be kept in a separate withdrawable account.
  • The scheme is implemented by Central Record keeping Agency & Several Pension Fund mangers.
  • An independent Pension Fund Regulatory and Development Authority (PFRDA) will regulate the pension market. 
  • Permanent Retirement Account Number (PRAN) allotted after 1.4.2008. 
  • Govt. servant can exit at or after 60 years of age. 
  • 60% of pension wealth can be withdrawn lumpsum. 
  • 40% of pension wealth to be invested in annuity - mandatory – to provide pension for life time for self and dependent.

To leave the scheme before 60 years of age
  • 80% of pension wealth mandatory for investment. 
  • Benefit of Invalid pension, Disability pension, Family pension, Extraordinary Family pension are extended. 
  • Retirement Gratuity for discharge from duty due to Disease / Injury or invalidation also extended.
Six Pension Fund Managers
  • ICICI Prudential Pension Funds Management Company Limited
  • IDFC Pension Fund Management Company Limited
  • Kotak Mahindra Pension Fund Limited
  • Reliance Capital Pension Fund Limited
  • SBI Pension Funds Private Limited
  • UTI Retirement Solutions Limited
Comparison of Earnings of
Old Pension Scheme and NPS
  • Date of Appointment - 1.1.2006
  • Entry Grade - GP - 4200, PB-2, 9300 – 34800
  • VI CPC period - 1.1.2006 to 31.12.2015
  • VII CPC period - 1.1.2016 to 31.12.2025 (with the multiplication factor of 2.06 + 40% fixation)
  • VIII CPC period - 1.1.2026 to 31.12.2035 (with the multiplication factor of 2.06 + 40% fixation)
  • Dearness Allowance - Jan 2006 to Dec 2011 actual, From Jan 2012 to Dec 2015 assumed increase @ 6% every half year for the periods 1.1.2016 to 31.12.2025 & 1.1.2026 to 31.12.2035.
  • Promotion / MACPS - First promotion/ MACPS during Jan-2016 and second promotion / MACPS during Jan-2026


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