New Defined

Contributory Pension
System(NPS)
ON RAILWAYS

By

A.K.GANESHAN
Sr.AFA/Establishment-ICC

Problems faced by pension

sector in INDIA
Our population is ageing. The share of the
aged in the total population is expected to
rise from 6.4% in 1991, to 8.9 % in 2016.
This is further expected to rise even more
rapidly to 13.3 % of the total Indian
population by 2026.
Indians living over 60 are expected to live
beyond 75 yrsthereby making it necessary
to support themselves for approximately 15
yrs after retirement, especially with the
advent of nuclear families.
A large percentage of retirees fall below the
poverty line during old age.

Why New Pension Scheme?

1.New pension scheme was mooted as a social
defense mechanism by the ministry of social justice
and empowerment through its Project OASIS (Old
Age Social and Income Security) report on January
14, 2000.
2.NPS is a sensible move since the exchequer is
today forced to pay over Rs 120,000 crore per year
for a very generous unfunded pension to
government retirees who constitute less than 1 per
cent of Indias population.
3.Implementation of NPS would also result in
capping Indias implicit pension debt, which is
estimated at over Rs 20 lakh crore and will have to
be financed through future taxes.

New Pension scheme

New Defined Contributory Pension

System(NPS) is applicable to all
Central Govt. services, including
RPF- except Armed Forces who join
Govt. services on or after 01-012004.

Salient features of New

Pension Scheme 2004
Retirement & Pension
For Railway employees recruited on or after
01.01.2004.
This scheme has Tier I and Tier II accounts.
Tier I is mandatory for all Railway employees who
joined service or after 01.01.2004.
Tier I contribution will be 10% of Basic Pay +
DA(plus NPA if any).
It will be deducted from salary every month.
Government will make an equal matching
contribution. Both will be rounded off to nearest
rupee.
Recovery will commence from the month following
the month of joining Railway Service.

 A unique 16 digit Permanent Pension Account

Number(PPAN) will be alloted to each Railway
employee under the scheme.
No withdrawal is permissible.
Tier I contribution and investment returns will
be kept in a non-withdrawable Pension Tier I
account.
Tier II is optional.
Tier II contribution will be kept in a separate
account that will be withdrawable at the option
of the Railway employee.
No Government contribution in Tier II will be
made.

 An annual statement containing details of

opening balance, monthly contribution,
contribution of Government and interest
earned has to be given to the employee.
Interest will be 8% from 1.1.2004.

Exit From scheme

On exit it is mandatory to invest 40% of
pension wealth in an annuity(from IRDA
regulated insurance company) which will
provide pension for the lifetime of the
employee
and
his/her
dependant
spouse/parents.
For those who leave the scheme before
attaining 60 years it is mandatory to invest
80% of the pension in such scheme.
An annual statement containing details of
opening
balance,
monthly
contribution,
contribution of Government and interest
earned has to be given to the employee .

Management of the Pension

Fund
There will be a Central Record Keeping Agency and
several Pension Fund Managers to offer 3 categories of
funds to Railway employees. A,B, C based on the ratio of
investment in fixed income instruments and equities.
Pending formation of a regular Central Record Keeping
Agency(CRKA), Central Pension Accounting Officer will act
as CRKA.
An
independent
Pension
Fund
Regulatory
and
Development Authority(PFRDA) will be set up. This
authority will regulate and develop Pension market. As an
interim measure and interim PFRDA has been set up by
Ministry of Finance.
Till regular CRKA and Pension Fund Managers are
appointed the contributions are kept in Public Accounts of
India as an interim measure.

Other benefits to Railway

employees joined after
1.1.2004
Existing provision of leave encashment will
continue for NPS Railway employees also.
Existing provision of Provident Fund and old
pension scheme not available for Railway
employees covered under NPS.
Length of Qualifying service is not relevant in
this case. Thus no credit of Casual Service on
Regularisation as Group D Railway employee.

Additional Relief on
Death/Disability
On invalidation not attributable to duty
Invalid pension calculated as per CCS(Pension )Rules 1972.
Retirement Gratuity.
Death in service not attributable to duty
Family Pension calculated as per CCS(P) Rules, 1972
Death Gratutity
Death in service attributable to duty
Extraordinary Family Pension calculated as per
CCS(Extraordinary Pension) Rules, and scheme of
Liberalized Pension Awards.
Death Gratutity as per CCS(P) Rules, 1972.
Discharge from service due to disease/injury attributable
to duty
Disabilty pension calculated as per CCS(Extraordinary
Pension )Rules.
Retirement Gratuity as per CCS(P) Rules, 1972.
The Railway employee/Family will be paid DP/DR
admissible from time to time in addition to the above
benefits from 1.1.2004

IncomeTax Provisions
Government Contribution will be included
in salary income.
Employee contribution shall be eligible for
deduction under 80 CCD(2) in computation
of his total income upto 10% of his salary.
Government contribution shall be allowed
a deduction in computation of his total
income, the amount contributed by the
Government not exceeding 10% of salary
U/S 80 CCD(1).
Aggregate amount of deduction Under
sections 80 C, 80 CCC, 80 CCD not to
exceed 1 Lakh

To sum up_ _ _
1. Skewed coverage
2. Inequity in benefits
3. Pressure on public finances
4. Low returns from existing schemes
5. Lack of availability of attractive, long term
Retirement Products.

Electronic Text file formats to CPAO

1. Subscribers General information,907 char
(Text file name 18 char, NPSGcccyymmsss.TXT)
2. Subscriber Schedule Information,372 char
(Text file name 18 char, NPSScccyymmsss.TXT)
3. Amendment of General Information
of Subscriber, 1927 char
(Text file name 18 char, NPSAcccyymmsss.TXT)
4. Subscribers Transfer out Information, 164 char
(Text file name 19 char, NPSTOcccyymmsss.TXT)
5. NIL report Information, 18 char
(Text file name 14 char, NPGNcccsss.TXT)

Further Clarifications from Railway Board

Benefit of Leave Encashment is admissible.
For 10% recovery DP should also be taken into account.
From DA arrears also Tier-I contributions to be recovered.
Contributions should be rounded off to nearest Rupee.
Whenever there is change in the emoluments during
middle of the month , change in the rate of recovery
should be from next month.

Further Clarifications from Railway Board

Interest be calculated by Associate Accounts Officers.
In case of transfer, recoveries should be made by the office
that draws salary for the maximum period of the month.
NPA, Charge Allowance, Running Allowance Element will
count as Pay for recovery purpose.
Procedure for calculation of interest on the balances of both EC and
GC shall be the same method used for computing interest on GPF.
Option for investments is not available at this stage.

Further Clarifications from Railway Board

Retirement Gratuity is not available to NPS subscribers.
Benefits in the event of death while in service are deceased
employees own contribution plus Governments contribution plus
Interest at GPF rate on both to the legal heirs.
Tax benefits on both EC and GC (Tier-I)will be on the basis of
EET, i.e., contributions & accruals are Exempt and terminal benefits
are taxed in the year of receipt.
Casual labour on temporary status who are regularized after
01.01.2004 only will be covered by NPS.

Further Clarifications from Railway Board

An individual can contribute to Tier-I even after attaining 60 years of
age, but GC will not be credited thereafter.
During the interim period, there is no provision for payment of Family
Pension in the event of the death of the employee.
PFRDA is the authority to decide on investment schemes & benefits
under NPS.
If the employee dies even before recovery of contribution starts, his
name will be taken-off the record from NPS.

Further developments on operationalisation of

NPS..
PFRDA appointed
National Securities Depository Ltd. (NSDL)
appointed as CRA for 10 years; function as
interface between PFRDA & PFMs
SBI, UTI Asset Management Co., & LIC
appointed as PFMs.
Except W B, Kerala & Tripura, all other 19
states are expected to join the scheme
Pension fund is expected to grow by Rs.1000
crores annually

Further developments on operationalisation of

NPS..
To start with only two options will be available for the
employees to choose- one is risk free assured
returns
through investment in government securities &
second one
is 5% investment in stock market,10% in equity
linked MFs,
while the balance invested in government security
related
funds.
PFRDA bill is yet to be passed by parliament
SBI would get 55% of NPS funds, UTI-AMC 40%, and
the
remaining 5% to LIC

03/15/16 11:52