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National Pension System

Retirement Benefits and National Pension System (NPS)

-Dr. Lalit Kumar

Retirement Benefits
The Haryana Civil Service Pension Rules, 2016 are applicable to the employees joined on or before 31st December 2005. The National Pension System (NPS) is applicable on the employees joined on or after 1st January, 2006 in Haryana. In case of retirement or superannuation including Voluntary Retirement Scheme (VRS) and Death of an employee, these rules become applicable to provide pension and family pension as a reward for working long term with commitment in the interests of Government.

Pensionary Benefits under Haryana Civil Service Pension Rules, 2016:

The rules, notifications, instructions issued prior to enforcement of Haryana Civil Service Pension Rules, 2016; have been repealed and everything is comprised into these rules. Every Government employee has right to get the pension commuted i.e. to realize a lump sum amount up to a prescribed fraction of pension at the time of retirement. He is entitled for Death Cum Retirement Gratuity (DCRG) also becomes admissible on retirement if an employee completed 5 years qualifying service. Even in case of death, such condition is not applicable and DCRG is admissible.
Family pension is also entitled to the family members of the employee after the death of an employee or pensioner.

Qualifying Service:

An employee working for the jobs assigned to him even with taking admissible leaves except extraordinary leaves which are sanctioned without medical sanction; the period covered in qualifying service.

If an employee completes more than nine years and nine months of qualifying services, he became entitled for the Pension. However, if he completes more than 20 years then he is entitled for full pension.

Control on Employees after Retirement:

Even after retirement, the employees are supposed to behave properly for the interests of Government. A retired employee cannot disclose any information of his office if it is affecting the economic interests of the state or whose disclosure may be considered as an offence. Even an undertaking is taken from the employee in this regard. In case, during the service, he or she has been provided any excess payment, that can be recovered after retirement also. If his or her functions caused any loss to government and it is detected after retirement; then also the same can be recovered by the competent authorities. However, in most of the cases it is required to take the consent of pensioner. In case, the pensioner denied to give consent, the Government can file legal suit against the pensioner and recover the amount with the orders of the court.

Benefit of Past Service for Pensionary Benefits:

At the time of retirement, the benefit of past service is provided to the employee provided the employee within one year from his joining submitted an application and the office has taken a certificate from the previous competent authority of the employee.

However, if an employee not joined the service through proper channel then the benefit of the past qualifying service cannot be claimed and not admissible to the employee.

Effect of Misconduct on entitlement of Pension:

In case, an employee remains wilfully absent from his duty and it led to interruption in the qualifying service, then that period is not counted as qualifying service. Even if an employee resigns from his service, then his entitlement of pension is affected adversely and it is forfeited by the authorities. If due to misconduct, fraud, embezzlement, economic offences, the employee becomes victim and dismissed or removed from the service then also the period of past service is forfeited for pensionary benefits as per the rules provided in Haryana Civil Service (Punishment and Appeal) Rules, 2016.

Calculators to compute Retirement Benefits:

The Department of Personnel and Training (DoPT), Government of India on its website, provided various calculators to compute the amount of retirement benefits. The following computations are required at the level of Head of Office i.e. Basic Pension, Family Pension, Commuted Pension, Gratuity, Computing Dearness Relief as per the orders of Government etc.
Basic pension computation requires Date of Birth, Date of Retirement, Total Qualifying Service, and Last Pay Drawn. The calculators are available on the webpage i.e. pensionersportal.gov.in/pensioncalculators/calculator.asp can be retrieved with copy and paste in the URL.

National Pension System (NPS):

For Haryana Government employees joined on or after 01.01.2006, the National Pension System (NPS) is applicable. The NPS is based upon the contributions to Pension Fund during the service of an employee. Haryana Government contributes 10% of the salary of employee in the NPS. The NPS Trust ensures that the contributions are pooled into a fund regulated by fund managers. Proper planning is done for making investments in securities including Government Bonds, Corporate Debentures, Equity Shares etc. The returns are earned on such investments on which basis the pension is computed at the time of retirement of an employee.

Permanent Retirement Account Number (PRAN):

PRAN is a unique number allotted to each subscriber of National Pension System. There are two types of contributions i.e. Tier – 1 and Tier – 2 contributions. The tier-1 contributions cannot be withdrawn before retirement which tier-2 contributions can be withdrawn as and when required by the subscriber.
At the time of retirement 60% (or less than 60%) of such wealth created can be taken by the subscriber however, if such wealth is less than Rs. 2 Lacs then entire accumulated pension wealth can be withdrawn by the subscriber. The remaining portion (40% or more) of the accumulated wealth is used to purchase annuity on which basis, the amount of pension is determined.
However, in case of death of an employee, it is required to invest 80% or more than 80% in purchasing annuity therefore 20% or less than 20% can be taken by the legal heirs of the subscriber. But in this case also if the amount of accumulated wealth is less than Rs. 2 Lacs then the entire accumulated pension wealth can be withdrawn.

What is annuity and how it works?

Annuity is considered as long-term investment of an amount which generates regular payment to the investor after making the investment. The amount of accumulated wealth fund of NPS is invested in an annuity as per the plan selected either by the fund managers or subscriber for which options are available.
During the period of service, the investments are done in the name of subscriber by investing and accumulating cash in PRAN. After retirement, the subscriber start getting the benefits of annuity plan in the form of pension.

What happened with the amount after death of Subscriber?

At present, in National Pension System; the annuity is kept in the name of subscriber after retirement. After the death of subscriber, the annuity is re-issued to the family members firstly to living dependent mother, dependent father, then to the surviving children, or to the legal heirs of the subscriber.

However, the subscriber is provided opportunity to change this current scheme: (a) He or She can opt to get monthly pension till he or she is alive and payment of purchase price at the end to the nominee, (b) He or She can opt for guaranteed annuity for 5 or 10 or 15 or 20 years and in such case, the pension is received for the same definite period either to subscriber or his / her nominees in case of death thereafter the amount of purchase price is not returned.
Apart from (a) and (b) other variety of plans can also be opted which are detailed by the PFRDA on its website. http://www.npstrust.org.in/

Course on Retirement Benefits and National Pension System:

The following inputs will be covered in the course:
1. An overview to Retirement Benefits
2. An overview to National Pension System
3. e-NPS: How to contribute and what are its benefits, How to get maximum out of NPS investments.
4. Duties of Drawing and Disbursing Officers in computing and making payments of Retirement Benefits, including practical illustrations.
5. Advances from Government Provident Fund (GPF).
6. Tier I and Tier II contributions of NPS Account and their features, benefits and tax treatment
7. Loans and Advances, how to sanction, amount to sanction, role of Punjab National Bank, number of instalments for recovery and computing interest on various types of loans
8. Assignments and their scoring. Feedback and Evaluation. References for further learning.
National Pension System

More about National Pension System:

Everybody desires to live a healthy life after the age of 60, known as retirement age or old age. Up to the age of 60, most of the people can easily survive on the basis of their earnings from business or job but thereafter their capacity to earn money reduced significantly and they require financial assistance to spend their old age with meeting mounting medical expenses. The National Pension System (NPS) provides an opportunity to contribute an amount on annual basis and then receive pension after the age of 60.

"National Pension System (NPS) is a voluntary defined contribution pension system and is limited EEE (Exempt-Exempt-Exempt) instrument (because partial amount received on maturity is still taxable) for saving income tax if it is used with proper planning". 

Conditions to join National Pension System:

There is no hard condition to join NPS, anybody between the age of 18 to 65 can join NPS and made contribution in NPS account. The Government of India opened Points of Preference (PoP) at various locations to help people join NPS. In order to locate the authenticated PoP Service Provider, it is required to visit the webpage https://www.npscra.nsdl.co.in/pop-sp.php and select the desired location. The service provided at PoP provides a registration form to be filled for opening NPS account. The form along with ID proof, Address proof, and Age proof is required to be deposited at PoP. The PoP will give the acknowledgement number.
In the age of information technology, it is not necessary to locate PoP and then reach there. The NPS account can also be opened through online submission of details. For this purpose, it is required to visit https://enps.nsdl.com/eNPS/NationalPensionSystem.html and click upon Registration button; however for online direct registration it is must that the individual should have an active bank account with ATM or Net-Banking facility. The NPS is regulated by PFRDA i.e. Pension Fund Regulatory and Development Authority. However the returns of NPS are linked with the performance of Equity, Debt, and Government Securities but in order to make it totally risk free, the Government of India is working upon upgrading its features. A new option will soon be provided under the title "Fund" for providing assured returns upon the NPS invested amount. The PFRDA is working upon Minimum Assured Returns Scheme for the NPS Subscribers.

Tax Benefits of investment in NPS:

In case, the NPS start offering guaranteed returns it will become a more lucrative option of investment for the tax payers because the section 80 CCD (1B) offers a deduction of Rs. 50000 for investment in NPS. Even in new tax regime, the deduction of 80CCD (1B) is available for the taxpayers.
The Indian citizens in the age group of 18 to 65 can invest in NPS Tier I account which is basic account for NPS. An employee if invests through employer, can claim and get tax deduction up to 20 percent of his salary contribution in his NPS including 10 percent on part of employee's contribution (in 80 CCD 1B or in 80C) and 10 percent on part of employer's contribution (in 80 CCD 2).  
The returns on NPS are also not taxable however the returns are not fixed as in the case of provident fund. The returns are realised after its maturity either at the time of retirement (for employees) or at the age of 60 years whichever is earlier. The 60 percent of the corpus is maximum allowed to get as lump sum payment on maturity and remaining portion is transferred on the selected annuity plan of any investment entity including SBI, HDFC, ICICI etc. It depends upon the performance of fund managers and asset mix, selected at the time of opening account in NPS, that how much returns you realised. 

Scope of National Pension System:

The NPS was introduced from 1st Jan 2004 and first of all, the employees of central government covered in NPS by contributing a portion of their salary along with matching contribution from the employers i.e. Central Government Organizations. Thereafter, the Government asked state governments to adopt and implement NPS. Most of the states adopted and implement NPS and made it mandatory for the employees to contribute a portion of their salary with matching contribution from the employers i.e. State Government Organizations.
The NPS is also available for corporate and citizens. The contribution in NPS provides deduction in taxable income of an individual and organization. The interest rates of Small Savings Schemes are attractive than the rates of Fixed Deposits.
Returns to Retired People

*Copyright © 2020 Dr. Lalit Kumar. All rights reserved.
You might also be interested in learning from the following:

1. How Money Grows in NPS   

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