All central government employees who joined service after January 1, 2004 are covered under the National Pension System (NPS). Understanding NPS helps you make the most of your retirement planning.
How NPS Works
Contribution Structure
- Employee contribution: 10% of (Basic Pay + DA) per month
- Government contribution: 14% of (Basic Pay + DA) per month
- Total: 24% of (Basic + DA) invested monthly
Example at Level 6 (₹35,400 basic)
With DA at 55%:
- Basic + DA = ₹35,400 + ₹19,470 = ₹54,870
- Employee contribution: ₹5,487/month
- Government contribution: ₹7,682/month
- Total invested: ₹13,169/month
Your NPS corpus grows through market-linked investments in equity and debt funds.
Investment Options
- Default (Auto Choice): Asset allocation automatically adjusts with age
- Active Choice: You choose allocation between Equity (max 75%), Corporate Bonds, Government Securities, Alternative Assets
At Retirement (Age 60)
- 60% of corpus can be withdrawn as lump sum (tax-free)
- 40% of corpus must be used to purchase an annuity (monthly pension)
Partial Withdrawal Rules
After 3 years of NPS subscription, you can partially withdraw (up to 25% of employee’s own contribution) for:
- Children’s education
- Marriage
- Purchase/construction of house
- Medical treatment of self or family
Maximum 3 partial withdrawals allowed in the entire NPS tenure.
NPS vs Old Pension Scheme (OPS)
| Feature | Old Pension (OPS) | NPS |
|---|---|---|
| Guaranteed pension | Yes (50% of last basic) | No (market-linked) |
| Contribution by employee | None | 10% of Basic+DA |
| Government liability | Unlimited | Defined (14%) |
| Withdrawal before retirement | Not applicable | Partial allowed |
| Corpus ownership | Government’s | Employee’s |
Several states have reverted to OPS - the debate continues. For central government employees, NPS remains in force.
NPS Tier II Account
You can also open a voluntary NPS Tier II account for additional savings with no lock-in (except for government employees who can claim tax deduction under 80C for Tier II investments).
For your overall salary picture, see our 7th Pay Commission salary guide. For all current government job openings, check this portal daily.
See also: Government Job Benefits Guide | 7th Pay Commission Salary | Latest Sarkari Jobs