Re-Introduce Old Defined Benefit Pension System (NPS)

Scrapping of New Pension Scheme

Representations have been received regarding the implementation of National Pension System (NPS) which, inter alia, include demand that NPS may be scrapped and the Government may re-introduce old defined benefit pension system.

Government has made a conscious move to shift from the defined benefit pay-as-you-go pension scheme to defined contribution pension scheme, now called as National Pension System (NPS), after considering the rising and unsustainable pension bill. The transition also has the added benefit of freeing the limited resources of the Government for more productive and socio-economic sectoral development.

There is no proposal to replace the NPS with old pension scheme in respect of Central Government employees recruited on or after 01.01.2004.
  • (e): National Pension System (NPS) had been designed giving utmost importance to the welfare of the subscribers. There are a number of benefits available to the employees under NPS. Some of the benefits are enlisted below: 
  • NPS is a well designed pension system managed through an unbundled architecture involving intermediaries appointed by the Pension Fund Regulatory and Development Authority (PFRDA) viz. pension funds, custodian, central record keeping and accounting agency, National Pension System Trust, trustee bank, points of presence and Annuity service providers. It is prudently regulated by PFRDA which is a statutory regulatory body established to promote old age income security and to protect the interest of subscribers of NPS.
  • Dual benefits of Low Cost and Power of Compounding- The pension wealth which accumulates over a period of time till retirement grows with a compounding effect. The all-in-costs of the institutional architecture of NPS are among the lowest in the world.
  • Tax Benefits- Contribution made to the NPS Tier-I account is eligible for tax deduction under the Income Tax Act, 1961. An additional tax rebate of Rs.50000 is also allowed for contributions made to NPS Tier-I under Section 80CCD (IB) of the Income Tax Act, 1961.
  • Transparency and Portability is ensured through online access of the pension account by the NPS subscribers, across all geographical locations and portability of employments.
  • • Partial withdrawal- Subscribers can withdraw up to 25% of their own contributions before attaining age of superannuation, subject to certain conditions.


The amount of monthly annuity payable to a Government servant on exit from NPS depends upon various factors such as accumulated pension wealth of the Government servant, portion of accumulated pension wealth utilized for the purchase of annuity and the type of annuity purchased.

Under the defined benefit pension system applicable to Government servants appointed before 01.01.2004, pension is calculated based on qualifying service and the last pay drawn by the Government servant.

Authority: Lok Sabha
Re-Introduce Old Defined Benefit Pension System (NPS)  Re-Introduce Old Defined Benefit Pension System (NPS) Reviewed by CENTRAL GOVT WORKFORCE(EMPLOYEES) NEWS on April 15, 2018 Rating: 5

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