Everyone wants to get pension for getting a regular source of earning after retirement as the potential to earn active income is decreasing with time. So, those who get stable and regular earnings which are substantial to lead a comfortable life even after retirement are considered as privileged people. One of such privileged class of people comprise of government employees, especially those who had joined their services before December 31, 2003, as they get inflation adjusted pension, which grows over time along with rising price levels.
However, government employees, who joined their services on or after January 1, 2004, are not as privileged as their senior colleagues, as the new employees come under contributory pension system, in which they need to contribute 10 per cent of their salary (basic salary + DA) per month to the previously known New Pension Scheme (NPS) that was launched specifically to cater to the pension need of new government employees. The government also makes a matching contribution for its employees in NPS, which it has now decided to increase to 14 per cent, while employees will continue to contribute 10 per cent.
Subsequently, NPS was termed as National Pension System and the gates of it were thrown open for general public from May 1, 2009. Now, any individual between 18 and 60 years of age may invest in both Tier-I and Tier-II accounts of NPS individually and apart from deriving the pension benefits, may also get additional tax deduction up to Rs 50,000 u/s 80CCD(1B) of income tax on contributions made to the Tier-I account. However, there will be no matching contribution against the individual contributions made.
The private sector and PSU employees may get additional benefit of matching contributions by their respective employers, if the organisations in which they are working, adopt NPS as their organisational pension system. Currently, most private sector companies are enrolled with Employees Provident Fund Organisation (EPFO), in which both employee and employers normally make matching contributions.
While EPFO is also a government body and a part of EPF contribution by the employer goes to Employees Pension Scheme (EPS), but NPS has wider choices of investment options to choose from and due to higher contributions to equity, NPS has greater probability of generating higher retirement corpus in long run than that of EPF, which provides fixed interests, rate of which is revised every year by the government.
As non-government employees are also eligible to fetch same NPS benefits, by adopting Corporate NPS-that was launched in December 2011 for private and public organisations-as their pension system, private and PSU employees may also earn same government pension that the government employees, who have joined their services on or after January 2004 will get.
Apart from NPS, any individual between age of 18 to 40 years may get pension up to Rs 5,000 per month from government by subscribing to Atal Pension Yojana (APY).
By availing combined benefits of NPS, APY and Public Provident Fund (PPF) and making regular contributions in the schemes from early age, you may generate enough retirement corpus to ensure substantial regular income post retirement to enjoy a tension-free life like that of a retired government servant.
Apart from the above schemes, the government has also launched contributory schemes-like NPS Swavalamban (also known as NPS-Lite), Pradhan Mantri Shram-Yogi Maandhan Yojana etc to provide pension to underprivileged and people who are associated with unorganised sectors like manual labour, agriculture and also for small businessmen and self-employed persons.