National Pension System (NPS)

National Pension System (NPS)

Govt. of India share to National Pension System (NPS) has been raised to 14% from 10%.

About:
• The GoI has decided to increase its contribution to the National Pension System (NPS) to 14 per cent from 10 per cent for the central government employees who joined service on or after January 1, 2004.
Tax exemption: The government has also enhanced the tax benefit by allowing entire 60 per cent of corpus withdrawn at the time of retirement to be tax exempt as against 40 per cent withdrawal component being tax free earlier.

National Pension System:
• The National Pension System (NPS) was launched on 1st January, 2004 with the objective of providing retirement income to all the citizens.

• Applicability/Coverage:

  • Initially, the National Pension System (NPS) was introduced for the new government recruits (except armed forces).
  • It was applicable to all new employees of Central Government service (except Armed Forces) and Central Autonomous Bodies joining Government service on or after 1st January 2004.
  •  It is also applicable to all the employees of State Governments, State Autonomous Bodies joining services after the date of notification by the respective State Governments.
  • From 1st May, 2009, NPS has been provided for all citizens of the country including the unorganised sector workers on voluntary basis.

• Benefits of NPS:

  • Old Age Security: The NPS aims to institute pension reforms and to inculcate the habit of saving for retirement amongst the citizens.
  • Transparency: It is transparent and cost effective system wherein the pension contributions are invested in the pension fund schemes and the employee will be able to
    know the value of the investment on day to day basis.
  • Simplicity: All the subscriber has to do, is to open an account with his/her nodal office and get a Permanent Retirement Account Number (PRAN).
  • Portable: Each employee is identified by a unique number and has a separate PRAN which is portable i.e., will remain same even if an employee gets transferred to any other office.
  • Regulated: NPS is regulated by Pension Fund Regulatory and Development Authority (PFRDA) – with transparent investment norms & regular monitoring and performance review of fund managers by NPS Trust.
  • Higher government contribution will result in greater pension payouts after retirement without any additional burden on the employee.