National Pension Scheme: Govt. contribution to rise to 14% from existing 10%

December 7: At a time when nationwide movement is organised by various employees unions as against the National Pension Scheme (NPS) and introduction of the old pension scheme, the Union Cabinet has come up with some reforms instead of rolling back the NPS scheme. Sources revealed that the Cabinet on Thursday raised the government’s contribution to National Pension Scheme (NPS) to 14 percent of basic salary from the current 10 percent. Minimum employee contribution will, however, remain at 10 per cent. Presently, the government and employees contribute 10 per cent of basic salary each to NPS.

The Cabinet, headed by Prime Minister Narendra Modi, also allowed government employees to commute 60% of the fund accumulated at the time of retirement, up from 40% at present. Also, employees will have the option to invest in either fixed income instruments or equities, sources said. As per the Cabinet decision, if the employee decides not to commute any portion of the accumulated fund in NPS at the time of retirement and transfers 100% to annuity scheme, then his pension would be more than 50% of his last drawn pay, sources said. The government did not announce the decision in view of the ensuing polls in Rajasthan Friday.

While the government is yet to decide on the date of notification of the new scheme, sources said such changes usually come into effect from the beginning of a financing year, meaning April 1, 2019. This formula for changes in the NPS was worked out by the Finance Ministry based on the recommendation of a government-appointed committee.