New Pension Scheme : Some clarifications

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					New Pension Scheme : Some clarifications..!

ADMINISTRATIVE STRUCTURE
The administrative setup of NPS subscription is planned as:

Employee>Paying officer>DDO>PAO>PrAO>PFRDA/CRA/NSDL>Trustee
Bank>Pension Fund managers

IS THE NEW PENSION SCHEME GOOD?

If calculated,we can see that the new pension scheme employees are actually
getting 10 % less pay than the old pension scheme staff.There is a wide spread
rumour that the new pension scheme offers amount in Lumpsum amount and
therefore it is better than the old pension scheme.How much truth is there in
it?Let's see...

Please note:The below calculations are based on pay of a Group C cadre of
scale 5200-20300(2500 Grade Pay) and if the government puts the whole
investment in fixed instruments of 8% annual interest.The percentage of
investments in equity which is speculated cannot be calculated.It purely depends
on how efficient the appointed fund manager is.The principal amount of
contribution without interest otherwise is:

Based on 10 years-210000(employee contribution)+210000(Govt
contribution)=Rs420000
Based on 20 years-540000(employee contribution)+540000(Govt
contribution)=Rs1080000

Therefore the amount of pension you get is purely based on the scheme you
chose.As per now,there is no scheme which allows to put 100% in fixed
instruments and the figures are just to compare.

Old and New Pension scheme comparison after completing 10 years(before 60
years)

CPF Calculation


Contribution
                    year          Sub.+Bal.+8%Interest            Total Amt.
   Amt.
    1300          i st year           15600 + 1248                  16848
    1400           ii year        16800 + 16848 + 2691              36339
    1500          iii year        18000 + 36339 + 4347              58686
    1600           iv year         19200 + 58686 + 6230                84116
    1700           v year          20400 + 84116 + 8361               112877
    1800         vi st year       21600 + 112877 + 10758              145235
    1900          vii year        22800 + 145235 + 13442              181477
    2000          viii year       24000 + 181477 + 16438              221915
    2100           ix year        25200 + 221915 + 19769              266884
    2200           x year         26400 + 266884 + 23462              316746




If equal government contribution also provides interest, Total tier-1 amount is
316746x2=Rs633492

80% in pension fund=506794

Amt you get at the time of retiring=Rs126698+Rs 3378 monthly pension (8%
interest of Rs506794 in a pension fund)+no gratuity

For old pension scheme after 10 years

GPF =316746
Gratuity=110000[1/4*(last bp+da)*(10*2)]
Total amount= Rs426746+Monthly pension Rs 3500+da (minimum pension )

Thus Comparison of old and new pension scheme gives over Rupees 3
lakh less benefits in lump sum amount and lesser monthly pension for new
employees after ten years of service for below 60 years retirement.

Old and New Pension scheme comparison after completing 10 years(reaching
60 years age)

If equal government contribution also provides interest, Total tier-1 amount is
316746x2=Rs633492

40% in pension fund=253396 Amt you get at the time of retiring=Rs380096+Rs
1689 monthly pension (8% interest of Rs253396 in a pension fund)+no gratuity

For old pension scheme after 10 years

GPF =316746
Gratuity=110000[1/4*(last bp+da)*(10*2)]
Total amount=Rs426746+Monthly pension Rs 3500+da (minimum pension )
Thus Comparison of old and new pension scheme gives over Rupees
50000 less benefits in lump sum amount and Rs 1800 lesser monthly
pension for new employees after ten years of service for age 60 retirement.

Old and New Pension scheme comparison after completing 20 years(before 60
years)

CPF Calculation


Contribution
                    year        Sub.+Bal.+8%Interest          Total Amt.
   Amt.
   1300           i st year         15600 + 1248                16848
   1400            ii year      16800 + 16848 + 2691            36339
   1500           iii year      18000 + 36339 + 4347            58686
   1600           iv year       19200 + 58686 + 6230            84116
   1700            v year       20400 + 84116 + 8361           112877
   1800         vi st year     21600 + 112877 + 10758          145235
   1900           vii year     22800 + 145235 + 13442          181477
   2000           viii year    24000 + 181477 + 16438          221915
   2100           ix year      25200 + 221915 + 19769          266884
   2200            x year      26400 + 266884 + 23462          316746
   2300           xi year      27600 + 316746 + 27547          371893
   2400           xii year     28800 + 371893 + 32055          432748
   2500           xiii year    30000 + 432748 + 37019          499767
   2600           xiv year     31200 + 499767 + 42477          573444
   2700           xv year      32400 + 573444 + 48467          654311
   2800        xvi st year     33600 + 654311 + 55032          742943
   2900           xvii year    34800 + 742943 + 62219          839962
   3000         xviii year     36000 + 839962 + 70076          946038
   3100           xix year     37200 + 946038 + 78659          1061897
   3200           xx year     38400 + 1061897 + 88023          1188320
If equal government contribution also provides interest, Total Tier-1 amount is
1188320x2=Rs2376640

80% in an annuity pension fund scheme=1901312

Amt you get at the time of retiring=Rs475328+Rs 12675 monthly pension (8%
interest of Rs506794 in a pension fund)+no gratuity

For old pension scheme after 20 years

GPF =1188320
Gratuity= 320000 i.e. [1/4*(last bp+da)*(no of every completed six month of
service)]
Total amount= Rs1508320+Monthly pension approax Rs 16000+da (half of last
bp+da )

Thus Comparison of old and new pension scheme gives over Rupees 10
lakh less benefits in lump sum amount and Rs 4000 lesser monthly pension
for new employees after twenty years of service for below age 60
retirement.

Old and New Pension scheme comparison after completing 20 years(reaching
60 years age)

If equal government contribution also provides interest, Total Tier-1 amount is
1188320x2=Rs2376640

40% in an annuity pension fund scheme=950656

Amt you get at the time of retiring=Rs1425984+Rs 6300 fixed monthly pension
(8% interest of Rs950656 in a pension fund)+no gratuity

For old pension scheme after 20 years

GPF =1188320
Gratuity= 320000 i.e. [1/4*(last bp+da)*(no of every completed six month of
service)]
Total amount=Rs1508320+Monthly pension approax Rs 16000+da (half of last
bp+da )

Thus Comparison of old and new pension scheme gives over Rupees 1
lakh less benefits in lump sum amount and Rs 9700 lesser monthly pension
for new employees after twenty years of service for age 60 retirement.
And some final questions:

1.The Government notifications only explains about giving a fixed pension with
this amount through a annuity and not about giving this huge amount of money
back to the employee at anytime.So what happens to the huge principal
amount(19 lakh in the case of a VRS) when the pension ceases after the
pensioner and his dependent's death?

2.Why doesn't the government give the whole money of contribution as on EPF
for the employee at the time of retirement to invest in bank atleast and enjoy
interest or his choice of investment?Why is the government putting restrictions of
40% and 80% to be only invested in annuity pension scheme without giving any
other choice to employee's hard earned money?

3.Isn't it a violation of Payment of Gratuity Act-1972 when the employer,who is
the Government of India,has decided to give no gratuity to new employees
without passing the new bill?

4.While EPF provides loan upto 36 months of wage,there is no scope for any
loan in CPF,the money is blocked until the employee retires.What should a new
employee do in case of an urgent requirement for building a house or marriage of
children?

				
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