National Pension System: Rs 50 lakh retirement corpus with just Rs 2000/month for central government employees!

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Updated: Oct 25, 2019 5:12 PM

National Pension System for Central Government Employees: All employees joining services of Central Government, including Central Autonomous Bodies (except Armed Forces) on or after 2004, are covered by NPS for their pension needs.

nps for government employeesNPS for government employees: In the case of government employees, the government contributes an equal amount matching to the contribution of the employee to his account. Representational image/Pixabay

National Pension System for Central Government Employees: All employees joining services of Central Government, including Central Autonomous Bodies (except Armed Forces) on or after 2004, are covered by NPS for their pension needs. Some state governments have also adopted the NPS architecture and implemented it for their employees joining from specified dates mentioned in their respective Gazette notifications. Unlike the old pension scheme, which was based on the last pay drawn by the employee, NPS is a defined contribution plan in which both the employee and employer contributes for building a pension corpus payable at the time of retirement, premature exit or death in the form of annuity and lump sum withdrawal.

In the case of government employees, the government contributes an equal amount matching to the contribution of the employee to his account. For example: If an employee contributes Rs 2000/month to the NPS, the government will also contribute a matching amount of Rs 2000 to his account. Wondering, how much pension this investment can ensure after retirement?

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According to Mandar Karlekar, assistant vice-president, NSDL e-Governance Infrastructure Limited, if a government employee starts contributing Rs 2000/month in NPS at the age of 30, the total monthly contribution to his account will be Rs 4000 (including that of the government). At an expected 8 per cent of return, this amount will result in a corpus of over Rs 50 lakh in 30 years, till the age of retirement at 60. By buying an annuity plan with this amount, one can get a monthly pension of Rs 26,000/month. Karlekar says in an official video of NSDL e-Governance that NPS has given 10-12 per cent returns.

What happens to money invested by government employees in NPS

Karlekar says the government has appointed three Pension Fund Managers (PFMs) – SBI Pension Funds Pvt Ltd, UTI Retirement Solutions and LIC Pension Fund to manage contributions by the government employees. They invest the government employee’s contribution in a pre-determined ratio. Total monthly contribution in an employee’s NPS account is distributed among three PFMs in a pre-determined ratio for investment. The PFMs have been instructed that fixed income securities should constitute a minimum 85 per cent of their investment. These include government securities, corporate bonds etc. And, they can invest a maximum of 15 per cent in equity and equity-related investments.

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The senior NSDL official says that the final pension of a retired government employee will depend on the size of the NPS corpus and the pension plan he/she chooses at the time of retirement. More the corpus, more the pension!.

How to withdraw pension

The pension process is simple. Karlekar says that at the time of requirement, an NPS subscriber will have to submit Withdrawal Request Form in office. The office will initiate the withdrawal request. The pension will start soon after the withdrawal request is initiated.

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