NPS is applicable to all central government employees (except Armed Forces) who had joined services on or after 1st January 2004. Later from May 2009, NPS was extended for all citizens of the country including the unorganised sector workers on voluntary basis with the objective of providing a retirement income, depending on their contributions. Earlier this year, for central government employees covered under NPS Tier-I, the mandatory contribution by the central government was increased from 10% of basic pay + dearness allowance to 14% of basic pay + dearness allowance.
The employees’ contribution rate remained the same at existing 10% of basic pay + dearness allowance.
Here are five things to know about pension benefits under NPS on voluntary retirement for government employees:
1) For government employees, under NPS, there is a provision for voluntary exit prior to the age of retirement, without linking it with the minimum number of 20 years of service.
2) According to the NPS rules, if a government employee before attaining the age of retirement prescribed by the service rules applicable to him or her, voluntarily retires or exits, then at least 80% out of the accumulated pension wealth of the subscriber will have be mandatorily used for purchase of annuity.
3) An annuity is a financial instrument which provides a regular payment of a certain amount of money on monthly/quarterly/annual basis, depending on the chosen time period and the accumulated kitty.
4) The balance of the accumulated kitty in NPS will be paid to the subscriber in lump sum.
5) According to the Department of Pension and Pensioners’ Welfare, the benefit of retirement gratuity and death gratuity has been extended to government employees covered under NPS on the same terms and conditions as are applicable under CCS (Pension) Rules, 1972.