NATIONAL PENSION SYSTEM (NPS)

NATIONA PENSION SYSTEM (NPS): 

NPS stand for National Pension System, which was introduced by the Central government from 1st January ,2014; to provide financial security to the people at their old age by replacing the old age pension system in India.

The Key features of the NPS: 

• A subscriber has to contribute an amount in his NPS account every month up to the age of Sixty.
• The Same amount will be contributed in the account from the government's end , also till the age of sixty.
• At the age of Sixty , the subscriber will be allowed to withdraw a maximum of 60% percent of the total corpus.
• The subscriber will have to invest the rest 40 % percent in annuity scheme or pension plans in some selected insurances companies. Theses companies will invest the amount and whatever they gain as profit will be divided into Twelve (12) parts and gives to the subscriber as a monthly pensions.        

Difference between old Pension System and New NPS:

1. In the NPS, the retirement benefits are not fixed but in old pension system it is fixed.
2. Old Pension system was predetermined how much pension an employee will get  linked to his last drawn salary and the length of his services. A government employee will get 50% of the last drawn basic salary plus DA and medical allowances as a pension.whereas, in NPS 10 % of basic salary of the employee is invested in some plans every month and government will contribute 10 to 14% percent .          

Disadvantages of NPS:

• In NPS, the pension amount is depends on how much one invested and how the condition of share market . As the Pension plans of the insurances companies are share market- driven , so market dependency is seen in NPS. The employee who don't have a long services tenure will not benefited from the NPS as their corpus amount will not be so high . Simply , in the NPS, high corpus means high pension and low corpus means low pension.
• Old Pension system provided a total security to the family of the employee. in case of death of the employee , the government provided family pension. But the government doesn't provide any such pension to the employee in the NPS, Rather , the employee has to buy annuity products or pension plans to get the pension.

In fact , NPS will certainly provide benefit to the subscriber in the long run at their old age , but if one compare the NPS with old pension system , then old pension system is always suitable for among the employees.However, government is trying their best to implemented this one roof pension system across the country except the defence personal.