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Friday, November 14, 2014

Benefits under Central Government Pension Scheme

The Central Government employees who have joined after 1/1/2004 and are put under National Pension Scheme (NPS)  have been demanding abolition of NPS and have been persuading the Central Government to make the government pension scheme applicable to them.

This only exhibits their ignorance of the fact that the New Pension Scheme is highly lucrative and make the government employees who joined after 1/1/2004 far richer than the government employees who enjoy government pension scheme.  By doing so they are in the process of ruining the great fortunes that lies in store under New Pension Scheme. Let me compare both the scheme:


Benefits under NPS

Let me take a case of Upper Division Clerk(UDC) who joins government service in 2014 at the age of 25  and renders 35 years  of service till attaining 60 years of age. He / She gets 3% annual increment every year and gets one promotion every 10 year under M.A.C.P.  Although he / she is likely to get 14 to 20% increase in D.A every year as per Consumer Price Index I just take 12%(assuming 6 + 6%) 2 times D.A in a year


YEAR
D.A.
assumed
@ 12%
Per
annum
PAY +
GRADE
PAY
with 3%
annual
increment
D.A
TOTAL
Total
Monthly
Subscription
(employee
and Govt)
Annual
Subscription
Annual
Appreciation
of Investments
@ 8.7%
Only
TOTAL
PENSION
WEALTH
2014
107%
9,910
10,604
20,514
4,102
49,224
2,320
51,544
2015
119%
10,210
12,150
22,360
4,471
53,652
7,012
1,12,208
2016
131%
10,520
13,781
24,301
4,860
58,320
12,511
1,83,039
2017
143%
10,840
15,501
26,341
5,268
63,216
18,903
2,65,158
2018
155%
11,170
17,314
28,484
5,696
68,352
26,290
3,59,800
2019
167%
11,510
19,222
30,732
6,146
73,752
34,779
4,68,331
2020
179%
11,860
21,229
33,089
6,618
79,416
44,487
5,92,234
2021
191%
12,220
23,340
35,560
7,112
85,344
55,546
7,33,124
2022
203%
12,590
25,558
38,148
7,630
91,560
68,097
8,92,781
2023
215%
12,970
27,886
40,856
8,172
98,064
82,293
10,73,138
2024*
227%
14,130
32,075
46,205
9,240
1,10,880
98,589
12,82,607
2025
239%
14,560
34,798
49,358
9,872
1,18,464
1,17,170
15,18,241
2026
251%
15,000
37,650
52,650
10,530
1,26,360
1,38,041
17,82,642
2027
263%
15,450
40,634
56,084
11,216
1,34,592
1,61,433
20,78,667
2028
275%
15,920
43,780
59,700
11,940
1,43,280
1,87,596
24,09,543
2029
287%
16,400
47,068
63,468
12,694
1,52,328
2,16,809
27,78,680
2030
299%
16,900
50,531
67,431
13,486
1,61,832
2,49,371
31,89,883
2031
311%
17,410
54,145
71,555
14,312
1,71,744
2,85,614
36,47,241
2032
323%
17,940
57,946
75,886
15,178
1,82,136
3,25,893
41,55,270
2033
335%
18,480
61,908
80,388
16,078
1,92,936
3,70,601
47,18,807
2034*
347%
21,060
73,078
94,138
18,828
2,25,936
4,21,184
53,65,927
2035
359%
21,700
77,903
99,603
19,920
2,39,040
4,78,101
60,83,068
2036
371%
22,360
82,956
1,05,316
21,064
2,52,768
5,41,139
68,76,975
2037
383%
23,030
88,205
1,11,235
22,248
2,66,976
6,10,878
77,54,829
2038
395%
23,730
93,734
1,17,464
23,492
2,81,904
6,87,954
87,24,687
2039
407%
24,450
99,512
1,23,962
24,792
2,97,504
7,73,068
97,95,259
2040
419%
25,190
1,05,546
1,30,736
26,148
3,13,776
8,66,975
1,09,76,010
2041
431%
25,950
1,11,845
1,37,795
27,560
3,30,720
9,70,498
1,22,77,228
2042
443%
26,730
1,18,414
1,45,144
29,028
3,48,336
10,84,535
1,37,10,099
2043
455%
27,540
1,25,307
1,52,847
30,570
3,66,840
12,10,066
1,52,87,005
2044*
467%
29,640
1,38,419
1,68,059
33,612
4,03,344
13,48,977
1,70,39,326
2045
479%
30,530
1,46,239
1,76,769
35,354
4,24,248
15,01,283
1,89,40,857
2046
491%
31,450
1,54,420
1,85,870
37,174
4,46,088
16,68,876
2,10,55,821
2047
503%
32,400
1,62,972
1,95,372
39,074
4,68,888
18,53,953
2,33,78,662
2048
515%
33,380
1,71,907
2,05,287
41,058
4,92,696
20,57,162
2,59,28,520
2049
527%
34,390
1,81,235
2,15,625
43,126
5,17,512
22,80,169
2,87,26,201
* MACP / Promotion Years

(A) Therefore, the total pension wealth of a government servant who joined in 2014 and retiring under New Pension Scheme shall at the time of his retirement be Rs. 2,87,26,201/-

(B) 60% of the lump-sum pension wealth which he / she will be  getting on retirement: 
Rs.1,72,35.720

(C) 40%   invested in an annuity scheme  which he / she can receive before 70 years:
Rs.1,14,90,481

(D) Earned Leave Encashment:  Rs. 215625 x 10 months        :  Rs.   21,56,250

TOTAL of (A) (B) (C) and (D) will be            Rs. 3,08,82,451

Death Gratuity:

Although not entitled for retirement gratuity, but eligible for Death Gratuity  If died during the service

Monthly Pension:

At the assumed Interest at the rate of 8.7% per annum on  the other 40%  of pension wealth of Rs.1,14,90,481  invested in annuity shall fetch monthly pension of  at least  :            Rs.83,306/ –

Not only this, before he / she attains the age of 70 he / she can withdraw the remaining  40% of his pension wealth of Rs. 1,14,90,481/- which if invested in Fixed Deposit of a nationalised bank can fetch interest and take care of not only of his wife and children but his descendants also for generations to come.

This is just a tip of the iceberg. If we consider the other  4 pay commission benefits that materialize on 1/1/2016, 1/1/2026, 1/1/2036 and 1/1/2046 which a NPS pensioner who joins as UDC shall be getting  before his retirement in 2049,his total pension wealth will be undoubtedly double the above amount which comes to more than Rs.5 crores. While a person who joins as U.D.C. gets this much, one will be rocked out of stupor to know what a Group A officer who renders 35 years of service may get – undoubtedly his total pension wealth will be more than Rs.10 crores.

Benefits under Central Government Pension Scheme

Now let us see what will be the retirement benefits of the above person if he / she is put in government pension scheme:

1.Gratuity for 16.5 months :
Rs.2,15,625 x 16.5 months = Rs.35,57,812/- Restricted to  Rs.10,00,000

2. Earned Leave Encashment:
Rs. 215625 x 10 months :     Rs.21,56,250

3. Pension Commutation:
Rs.17195 x 40% = Rs.6878 x 12 x  8.194 years   Rs  6,76,300
Total Benefits under Central Government Pension Scheme:         Rs.38,32,550

4. GPF Balance:
As it is a general tendency of the government servants to withdraw from GPF frequently, there will be very little left at the time of retirement

5. Monthly pension
i) Rs.34390 / 2    =  Rs.17195 (basic pension being 50% of pay and grade pay Less 40% of basic pension towards commutation (Rs 6878) which will be restored after 15 years

Balance basic pension       is Rs. 10317

ii) DA @ 527% of basic pension of Rs.17195  = Rs. 90617 (subject to increase in DA every 6 months based on consumer price index)

Total pension                        is Rs.1,00,934 per month.

After the death of government servant  say after 67 years, spouse can take only 60% of the basic pension i.e.Rs.17195 x 60% = Rs.10317 plus D.A.at the prevailing rates. After spouse’s death children are unlikely to draw the pension as they would have already crossed the age limit.  Thus, unlike the dependents of NPS pensioners, there will be nothing left for financial security  of the dependents of the government pensioners .

Thus it is unwise on the part of government servants who have joined after 1/1/2004 to demand for abolition of NPS scheme and grant of government pension.

Mr.M.Dorai
Deputy Director
ESIC Model Hospital,
Bangalore (Ministry of Labour, Government of India) is the author of this Article.




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