Restoration of Old Pension System in place of Contributory Pension System

Restoration of Old Pension System in place of Contributory Pension System

In a written reply the Minister of State for Finance said the features of the New Pension Scheme in Rajya Sabha on 21st March 2017

National Pension System (NPS), which is a contributory pension system, has, inter alia, the following features which benefit the employees:

NPS is a well designed pension system managed through an unbundled architecture involving intermediaries appointed by the Pension Fund Regulatory and Development Authority (PFRDA) viz. Pension Funds, Custodian, Central Record keeping and Accounting Agency, National Pension System Trust, Trustee Bank, Points of Presence and Annuity Service Providers. It is prudently regulated by PFRDA which is a statutory regulatory body established to promote old age income security and to protect the interests of subscribers of NPS.

Dual benefit of Low Cost and Power of Compounding- The pension wealth which accumulates over a period of time till retirement grows with a compounding effect. The all-in-costs of the institutional architecture of NPS are among the lowest in the world.

Tax Benefits- Tax benefits are available to the NPS subscribers under various provisions of the Income- tax Act, 1961.

Transparency and Portability is ensured through online access of the pension account by the NPS subscribers, across all geographical locations and portability of employments.

Partial withdrawal- Subscribers can withdraw up to 25% of their own contributions towards their pension account, before attaining superannuation age for certain specified purposes subject to certain conditions.

Representations have been received from certain quarters regarding the implementation of NPS which, inter alia, include the demand that NPS may be scrapped and the Government may revert to old defined benefit pension system. However, there is no proposal to replace the NPS with old pension scheme in respect of Central Government employees recruited on or after 01.01.2004.

The above information given by the Minister in Parliament on 21st March 2017.