The UT Administration has adopted the New Defined Contributory Pension Scheme (by an amendment in Punjab Civil Services Rules) in respect to the new entrants. The scheme will be applicable to all government employees who joined service on or after January 1, 2004. The scheme will work on defined contribution basis and will have two tiers - Tier I and II. Employees will have to make mandatory contribution to Tier I, whereas Tier II will be optional and at the discretion of the employee. As per the scheme, all employees will have to make a contribution of 10 per cent of their basic plus DA and an equal contribution would be made by the government. The contribution made in Tier I will be non-withdrawable while Tier II will be kept in a separate account that can be withdrawn at the discretion of the employee and no contribution will be made by the government to the Tier II account. Recoveries towards Tier I contribution will start one month after the joining date of the employee. A central record keeping agency will implement the scheme. A government employee who has a Tier I account will have to invest 40 per cent of the pension wealth to purchase an annuity from an IRDA regulated life insurance company after attaining the retirement age, which will provide for pension for the lifetime of the employee and his dependent parents/spouse. In case the employee leaves the scheme before attaining the retirement age, the mandatory annuitisation would be 80 per cent of the pension wealth.
The scheme of voluntary contributions under Tier II will not be made operative during the period of interim arrangement and therefore, no recoveries will be made from salaries of the employees on this account.