NEW PENSION SCHEME INTRODUCTION

NEW PENSION SCHEME INTRODUCTION

Introducing a new restructured defined contribution pension system for new joined central government servants- The Indian government approved NPS on 23rd August 2003. The proposal to be implement the budget announcement of the 03-04 relatinf to introducing a new  restructured defined pension scheme for new joined central government employees except to the Armed forces     ( Indian Army, Indian navy ,and Air force) in the first stage replacing existing pension system by the defined benefit pension system.

1) National pension schemes will be compulsory for new recruit government servants from 01.01.2004. Except Armed forces in the first stage. The Monthly contribution would be 10 percent of the salary and DA to be paid by the employee and matching contribution by the central government. However there will be no any contribution from government in respect of individual who are not government servants. The contribution and investment returns will be deposited in  the Tire I account. Tire I will not allow employee to withdraw their amount form the account. The exisiting pension system and GPF would not be available to new recruit employees.

2) In addition to the National pension scheme account each individual may also can open voluntary Tire II withdrawable account by their choice. This option is given to replacing GPF. Government will not make any contribution to this account. The employee will be free to withdraw from Tire II account any time. Tire II account will not get any pension to the investor and and no any tax treatment.
3) individual can normally exit at or after the age of 60 years for the Tire I of the pension system.At the exit the individual have compulsion to invest 40 percent of the pension wealth to purchase an annuity from IRDA regulated life insurance company. In case employee the annuity should be provide for pension for the lifetime of the employee and his dependents like parents spouse childerns at the time of superannuation. The individual will receive full remaining pension wealth amount which he will be free to use as per their wish.

4) IMP Individual can leave the pension system before attending the age of 60 ,owever in this case the mandatory annuity should have to invest 80 percent of pension wealth amount.

5) When superannuation request is received form the employee subscriber other than the employee subscriber under NPS swavalamban scheme having pension wealth of amount Rs. 200000/- or less he can withdraw total pension wealth amount form the account.