NPS Pension: The central government has issued a new guideline regarding contribution to the National Pension System (NPS) for its employees.
This guideline has been issued on 7 October 2024 by the Department of Pension and Pensioners under the Ministry of Personnel, Public Grievances and Pensions. Under the new guidelines, some changes have been made in the process and rules of NPS contribution, which will be reviewed from time to time.
What is NPS
The National Pension System (NPS) is a pension scheme in which 10% of the employee’s basic salary and dearness allowance (DA) is deducted for the pension fund. In addition, 14% of the basic salary is contributed by the government. NPS is linked to the stock market, which means that the pension of government employees directly depends on the fluctuations of the market. After retirement, 40% of the NPS is invested in annuity so that pension can be received after retirement. However, this scheme does not offer a guaranteed pension, due to which there is dissatisfaction among government employees.
Will be reviewed from time to time
The new memorandum issued by the government clarifies that employees will have to contribute 10 percent of their monthly salary to NPS. This contribution will be rounded off to the nearest whole rupee. Along with this, this contribution will be reviewed from time to time so that any kind of mistake in it can be corrected. If there is any error in calculating the contribution, it will be deposited in the employee’s pension account along with interest.
You can continue your contribution even after suspension
If an employee is suspended, he will have the option to continue making NPS contributions. After the suspension ends, when the employee returns to service, the contribution will be recalculated based on the new pay structure prevailing at that time. This will ensure that the pension contribution of employees is not affected during the suspension period.
Contribution is mandatory even during the probation period
According to the new guidelines, if an employee is absent or on leave without pay, he will not be required to make NPS contribution for that period. However, it will be mandatory for employees working on probation to make NPS contribution, even if they are transferred to another department or institution.
Contribution will be given along with interest on delay
The Drawing and Disbursing Officer will deposit the contribution deducted from the salary of the employee every month. After this, the Pay and Accounts Officer will compile all the contributions by the end of the month and send it to the Trustee Bank. The deadline for depositing the contribution will be fixed especially for the month of March. If there is any delay or mistake in depositing the contribution, the employee will get his entire contribution back along with interest.
Why is the new guideline important
This new guideline is important because it provides employees with more clarity and security regarding their NPS contribution. This will ensure that if there is any error in the salary or contribution of an employee, he will get the benefit with interest on time. Also, the rights of the employees to their pension contribution will remain secure even in situations like suspension or transfer.
Unified Pension Scheme (UPS) announced
Recently, after the demand of government employees, the government has announced the Unified Pension Scheme (UPS). This scheme will be implemented from April 1, 2025. Under this scheme, the employee will not be responsible for funding the pension. The government will bear 18.5% of the basic salary of the employees. This is a guaranteed pension scheme, in which employees who have served for more than 10 years will be entitled to receive a minimum pension of Rs 10,000. Apart from this, a lump sum amount will be given at the time of retirement under UPS. In this, retiring employees will be entitled to receive 50% of their last 12 months’ average basic salary as pension.
Difference between NPS and UPS
While NPS is based on the stock market and does not provide guaranteed pension, employees in UPS will be given guaranteed pension. Employees in UPS will get gratuity as well as a lump sum amount. After retirement, the employee will receive a certain percentage of his salary as pension, which will secure his future.
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