If you are a government employee in India then you will be eligible for the national pension policy as per the rules and regulations presented by the Indian government for all state government and Central government employees. It is said that a lot of states will be returning to the old pension scheme which was previously replaced by the national pension scheme created by the Indian government for the development of the 9 to 5 sector in India. You can check out the details related to the NPS vs OPS from the article provided below. We will also share with you all the old pension schemes versus the new pension scheme so that you can form your own opinion.
What is NPS vs OPS
The national pension scheme was presented by the Indian government on the first of April 2004 and since then it has been replacing the old pension policy which provides 50% of the salary to the Employees as a pension. The national pension scheme is officially presented for all the state government and Central Government employees because these employees are liable to get retirement benefits if they have successfully helped the countries through their services and their hard work until they have attained the age of 60 years. The state government and the Central Government employees are automatically eligible for the national pension scheme because this is the scheme that the Indian government currently adopts for employees all over the country. The main motive is to provide old age security to all of Government employees in India through the pension scheme.
Latest Updates of NPS vs OPS
On 1st April 2004, the national pension scheme successfully replaced the old pension scheme. However, the Government of India has other plans. They recently announced that they will implement the NPS vs OPS which was previously replaced by the national pension scheme in 2004. Several other states are also considering revoking the old pension scheme. This is a very controversial opinion that can be taken by the different state governments in India. Pension schemes play a major role in the salaries of the central and State Government employees because it is their retirement benefit. The pension schemes basically depend upon fund management. The official step is not yet taken by the government but it can be taken in the upcoming time.
Old Pension Scheme
The employees do not have to make any contribution to the old pension scheme. The employees will get 50% of their most recent basic salary plus dearness allowances as a pension through the development of the old pension scheme. Employees can also get the average wages in the most recent 10th month of services depending upon the option which is most beneficial to the Employees. The employee must have at least 10 years of service in order to get the old pension scheme and there is a guarantee of getting a certain amount of money every month in the old pension scheme. Tax advantages are not provided in the old pension scheme.
National Pension Scheme (NPS)
A new pension scheme is implemented on a contribution system which is to be done by the employees and they will have to pay at least 10% of the basic salary every month into their NPS account and the employers will also contribute 14% to this. The private sector employees can also get their NPS account and engage in the NPS program. Beneficiaries may deduct an investment in the NPS of up to 1,50,000 rupees from their taxable income. Under the provisions of Section 80CCD (1B) of the Act, additional yearly investments of up to Rs 50,000 are eligible for a tax deduction. Under the NPS a retiree may take a lump payment from their pension. 60% of the maturity corpus is tax-free, while the remaining 40% must be deposited in annuities for a normal income or pension.
Payments and Contributions
You can check out the details related to the payments and contributions that you have to make in both of the pension policies:-
- Under the old pension scheme, the retired employees will get 50% of their last draw salary as a monthly pension.
- Under the new pension scheme, the employees have to contribute 10% of their salary and the government will contribute 14% towards the national pension accounts of the employees.
Difference In Old Pension vs New Pension Scheme
You can check out the differences between NPS vs OPS from the table provided below:-
|Contribution||The applicant will have to invest in the national pension scheme as compared to the old Pension scheme. The applicant will have to contribute 10%.||The applicant does not have to invest anything in the old pension scheme.|
|Returns||NPS returns aren’t certain. The subscriber’s asset allocation during employment determines returns.||The old pension scheme will definitely give you a monthly payout because of the rules and regulations. Forever, it will be 50% of your recent salary.|
|Beneficiaries||Government employees and private employees may join the NPS.||Government employees.|
|Tax Advantages||This scheme can attract taxes as well.||No tax Under OPS|
|Pension Amount||Employees will have to contribute 10% of their salary and employers will contribute 14%.||50% of the last salary becomes the pension.|
|Risk Factor||Its involves risk||Risk-Free|
|Fluctuations in the Funds||Larger returns after retirement but no guarantee can also return smaller than expected||You will always have the same returns as it depends on the last salary taken.|
|Investment Decision||Employees will have to give 10% and employers will have to give 14%.||Employees do not have to invest anything from their salaries.|
|Plan Stability||Plans are stable for the government and beneficial. As the money is already invested by the employee during his working period.||This plan is unstable for the government as retired people’s life expectancies increase. It is costly for the government to run such schemes.|