News Highlight
The promise of the Congress in Himachal Pradesh is that, if they come back in power, the party will restore the old pension scheme.
Key Takeaway
- The promise is that the party will restore the old pension scheme for all retired government employees.
Old Pension Scheme
- About
- Under the old pension scheme, government employees are guaranteed a lifetime pension, which is 50% of the last drawn basic salary, with a dearness allowance added every six months based on inflation.
- Status
- The Government bears the expenditure incurred on the pension.
- The scheme was discontinued in 2004.
- Features
- Under the Old Pension Scheme, employees are not required to contribute to their pensions and pension was guaranteed.
The National Pension System (NPS)
- About
- The Union government took a decision in 2003 to discontinue the old pension scheme and introduced the NPS.
- The scheme is applicable to all new recruits joining the Central Government service (except armed forces) from April 1, 2004.
- Employees contribution
- It is a participatory scheme, where employees contribute to their pension corpus from their salaries, with matching contributions from the government.
- Pension Fund Managers
- The funds are then invested in earmarked investment schemes through Pension Fund Managers.
- Withdrawal
- At retirement, they can withdraw 60% of the corpus, which is tax-free and the remaining 40% is invested in annuities, which is taxed.
- Implementation
- NPS is being implemented and regulated by PFRDA (Pension Fund Regulatory and Development Authority) in the country.
- National Pension System Trust (NPST) established by PFRDA is the registered owner of all assets under NPS.
- Tier-I account
- This is the non-withdrawable permanent retirement account into which the accumulations are deposited and invested as per the option of the subscriber.
- Tier-II account
- This voluntary withdrawable account is allowed only when there is an active Tier I account in the name of the subscriber.
- The withdrawals are permitted from this account as per the subscriber’s needs as and when claimed.
- Portable
- NPS provides seamless portability across jobs and locations, unlike all current pension plans, including that of the EPFO.
- It would provide a hassle-free arrangement for individual subscribers.
- Eligibility for opening an NPS account
- A citizen of India, whether resident or non-resident, is subject to the following conditions:
- Applicants should be between 18 – 70 years of age as of the date of submission of his/her application and should comply with the KYC norms prescribed.
Content Source: New Indian Express