What is the difference between NPS and Ops?

New pension scheme, better than old!  Know what are the benefits of both

Most of the government employees of the country are in favor of the old pension scheme.  Recently, the Punjab government said that it is reconsidering to restore the old pension scheme for its employees.  If this happens, Punjab will become the third state after Rajasthan and Chhattisgarh to reintroduce OPS.  At the same time, experts believe that this is a popular political decision, which will increase the financial burden on the government exchequer as well as the tax burden on the taxpayers. 

Sumit Shukla, MD and CEO of Axis Pension Fund said, 'Many countries have adopted a defined benefit system (  Old Pension Scheme) has been abolished.  Because governments around the world have been hit hard by rising pension liabilities.  The new pension scheme will be applicable to those employees who have joined the service after January 1, 2004 and will know about its benefits after retirement. Let's know about both the pension schemes, how it affects the government, employees and pensioners.

 What is the new pension scheme?

 The central government introduced a new or national pension system for its employees (except the armed forces).  who joined the service after 1 January 2004.  After this, except Tamil Nadu and West Bengal, most state governments implemented this new system.  Suresh Sadagopan, founder of Ladder 7 Financial Advisory, said, 'Governments' growing pension liabilities necessitated system change.  OPS was not viable for the government exchequer and reintroducing it would be fatal. Under the new pension scheme, government employees contribute 10 percent of their basic salary to build their retirement corpus, while their employers contribute up to 14 percent.  NPS is also open to private sector employees on a voluntary basis, though some rules have been modified.  The amount deducted under NPS is invested in equity market and government securities.

On retirement, employees will be able to withdraw up to 60 per cent of the lump sum, albeit tax free, while the increased 40 per cent will essentially be converted into an annuity, which will generate pension income for life.  Unlike OPS which offers a fixed payment guarantee.  The amount in NPS increases with the market.  Equity market bullishness in long term favors NPS, but short term volatility is also likely.

 Old Pension Scheme

 Under the old pension scheme, the central employees who joined the service before January 1, 2004, come  The pension amount formula in this scheme is straightforward.  It includes 50 percent of last pay and dearness allowance, which is paid as pension after retirement.  For its eligibility an employee must have been employed for at least 10 years.  The biggest thing is that the pension scheme provides a family pension to the husband or wife after the death of the pensioner.

Does NPS get a fixed pension like OPS?

 No, the new pension scheme is based on defined contribution and not profit.  If employees want more pension income, they can voluntarily contribute more to the fund during their tenure.  So that you can get huge amount on retirement.

 

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 However, experts say that the new pension scheme is much better than the old pension scheme.  Because in terms of compensation, employees will get better amount on retirement and get more pension.  An employee has the option of equity and debt funds to invest in NPS, which can provide better returns.