The National Pension System is a voluntary scheme in which all central government employees, excluding those in the armed forces, can make regular contributions to their NPS account. The National Pension System is governed by the PFRDA Act of 2013, as well as the regulations enacted by the Department of Financial Services and the PFRDA. In the NPS, a government employee contributes to his or her pension from his or her monthly income, with an equal contribution from the employer towards his or her specified investment plans which is managed by Pension Fund Managers of NPS. In this article, we will highlight key measures undertaken by several ministries for central government employees covered under NPS.
Investment Schemes For Central Government Employees Covered Under NPS
Central Government Employees or Subscribers covered under NPS can customize their Tier I account by specifying any of the Pension Funds (PFs) as well as an investment plan. If the Subscriber does not pursue the option, NPS contributions will be allocated in the existing default schemes of the three Pension Fund Managers (PFMs), namely LIC Pension Fund Limited, SBI Pension Funds Pvt. Limited, and UTI Retirement Solutions Limited, in a fixed amount, as specified in the Statement of Transaction (SoT), in accordance with PFRDA's standards. According to NSDL, a subscriber can choose from the following investment plans:
1. Default Scheme - Investments would be done in defaults schemes of LIC, UTI, and SBI in a predefined proportion.
2. Scheme G - 100% of contribution shall be invested in Government Bonds and related instruments.
3. Scheme LC 50 - Life cycle fund where the Cap to Equity investments is 50% of the total asset.
4. Scheme LC 25 - Life cycle fund where the Cap to Equity investments is 25% of the total asset.
Initiatives Made By Department of Pension and Pensioners’ Welfare For Central Government Subscribers
In the event that a government employee receives benefits under the old pension scheme due to in-service death or discharge from employment due to invalidation or disablement, the government contribution and returns thereon in the Government servant's accumulated pension fund under NPS would be surrendered into the Government account, and employees' contributions with returns thereon would be hand over to the subscriber or his or her family.
According to a DoPPW OM dated 01.01.2021, if a government employee who was hired on or after January 1, 2004, and is covered by the NPS is disabled, he will be eligible for a lump sum compensation calculated in accordance with rule 9(3) of the CCS(Extraordinary Pension) Rules, if the disablement is directly related to Government service and the Government employee is retained in employment.
Initiatives Made By Department of Financial Services For Central Government Subscribers
Notification from the Department of Financial Services dated January 31, 2019 - In response to the committee's proposals for initiatives to streamline NPS implementation, the Department of Financial Services, in a notification dated 31.01.2019, extended the following advantages to government employees covered by NPS:
(i) Employee contribution 10% of the salary and DA with matching contribution @ 14% by the Government w.e.f. 01.04.2019.
(ii) Investment of NPS wealth upto 95% in infrastructure/Debt funds and 5-15% in equity for Government employees. Life Cycle-based funds viz. LC-50 and LC-25 are also available w.e.f. 01.04.2019.
(iii) Option for investment choices and Pension Fund made available to Government servants w.e.f. 01.04.2019.
(iv) Investment in NPS Tier II has been brought under Section 80 C for tax exemption w.e.f. 01.04.2019
Exit Rules Made By Department of Financial Services For Central Government Subscribers
Employee contributions and government contributions were allocated by Pension Fund Managers according to the investment plan established by the PFRDA for Central Government workers. For government personnel, there were three PSU Pension Fund Managers. Employees in the government have no option in terms of Pension Fund Managers or investment schemes. A member must invest at least 40% of his or her accumulated pension corpus in Tier-I to purchase an annuity from an Annuity Service Provider, and Insurance Regulatory and Development Authority (IRDA) regulated Insurance Company registered with PFRDA when exiting NPS on superannuation.
A maximum of 60% of the accumulated corpus in the Tier-I account is allowed for central government employees. If a government employee exits the NPS before reaching superannuation, that is, before reaching the age of 60, he or she must deposit at least 80% of the accumulated corpus in an annuity and withdraw the remaining 20% as a lump sum.
Benefits Available In The Case of Death of a Central Government Employee Covered under NPS During Service
Under rule 10 of the CCS(Implementation of NPS) Rules, 2021, Central Government workers covered by the National Pension System have the choice of receiving benefits from either the old pension plan or the accumulated pension corpus under the NPS in the instance of their demise. This option is not available to the family of a deceased government employee. If a Central Government employee fails to provide a preference in this respect, the default mode is to receive benefits under the old pension plan for the first 15 years of service, after which the default option is to receive benefits under the NPS.
In accordance with these laws, the default mode of the old pension plan is currently in vogue until March 2024, even if a government employee has fulfilled 15 years of employment. According to the official website of the Pensioners Portal, in the case of the in-service death of a Central Government Employee covered by NPS, the following benefits are available:
(i) Family pension under CCS(Pension) Rules, 1972 as per option exercised by Government servant or default option or In case, Government servant has opted for benefits under NPS, the family would get benefits from his accumulated pension wealth under NPS.
(ii) Death Gratuity
(iii) Leave Encashment
(iv) Benefits from CGEGIS,
(v) CGHS facilities
Rule 20 of CCS (Implementation of NPS) Rules, 2021
1. If a government employee had preferred for benefits under the old pension scheme or if no alternative was enforced, the relevant office would act immediately to sanction family pension to eligible members of the deceased government employee's family, since it is accomplished for government employees covered under the old pension scheme, i.e. as is pertinent to those who joined service before the scheme was implemented.
2. Concurrently, the concerned office would close the government servant's PRAN under NPS and the contribution made by the government and return would be transferred into the Government account respectively. The outstanding amount would be given in lump sum to the nominee or legal successor in accordance with PFRDA regulations.
3. Those government employees who had selected for NPS benefits in the incident of their death, or if no option was enforced, whose default option is NPS benefits, the concerned office would close the deceased government servant's PRAN under NPS and hand over lump-sum benefits of up to 20% of accumulated pension wealth and annuity from the remaining pensions to the eligible member from annuity service provider registered with PFRDA.
4. In both situations, additional benefits such as death gratuity, leave encashment, CGEGIS, and CGHS would be available.
Source: Pensioners' Portal