New Pension Scheme Frequently Asked Questions

  1. What is the New Pension System (NPS)?

    The NPS is a new contributory pension scheme introduced by the State Government for its own new employees. Under the new pension system, each new central government employee will open a personal retirement account on joining service. Every month, and till the employee retires or leaves government service, a part of the employee's salary will be transferred into this account. When the person retires, he will be able to use these savings to take care of the needs and expenses of his family during old age.

  2. When was the NPS introduced?

    The NPS was introduced with effect from 01 January 2004 vide Notification 5/7/2003-ECB&PR issued on 22-Dec-2003 by the ECB&PR Division of the Department of Economic Affairs, Ministry of Finance, Government of India.Government of Rajasthan Finance Department (Rules Division) issued a memorandumNo.F.13(FD/Rules/2003 jaipur, dated 28-Jan-2004 introducing NPS for State Government employees appointed in the government on or after 1-Jan-2004.

  3. Who is covered by the NPS?

    You are covered by the NPS if
    You joined State government service on or after 01-Jan-2004, and
    You are an employee of a Panchayat Samiti/ Zila Parishad,
    You are an employee of a State Autonomous Body, Universities.

  4. Under what circumstances can my account be closed before attaining retirement age?

    The account would be closed under following circumstances: death, account value reduces to zero and change in citizenship status.

  5. Can I exit before attaining the age of 60 years?

    Yes, provided you annuitise at least 80 percent of your pension corpus.

  6. Are there any investment returns guarantees?

    No. NPS is a defined contribution scheme and the benefits would depend upon the amounts contributed and the investment growth up to the point of exit from NPS.

  7. Will I be permitted to select more than one pension fund to manage my savings?

    You have to select only one fund. However, the regulator may allow the subscribers to choose more than one fund in future. Presently, option of choice is not permitted and investment is based on "autochoice" which is as follows:
    a. State Bank of India Pension Fund Pvt. Ltd. 33%
    b. Unit Trust India Retirement Solution Ltd. 32%
    c. Life Corporation of India Pension Fund Ltd. 35%

  8. What if I do not select any investment option?

    All your contributions would be channeled into a life-cycle fund.

  9. What are the risks of investing in NPS?

    As with every investment, there is a degree of risk under NPS also. The value of your investment in NPS may rise or fall.

  10. What will happen to my savings after I retire at 60?

    You will have to compulsorily invest a minimum of 40 percent of your pension wealth to purchase a life annuity from an IRDA-regulated life insurer. The remaining pension can be withdrawn in lump sum or in a phased manner.

  11. What will happen to my savings if I decide to exit NPS before the age of 60?

    You would be required to invest at least 80 percent of your pension wealth to purchase a life annuity from any IRDA-regulated life insurer. The remaining 20 percent may be withdrawn as a lump sum.

  12. Will the annuity also provide for a family (survivor) pension?

    Yes, you will have an option of selecting an annuity which will pay a survivor pension to your spouse.

  13. On my death, can my nominee continue to operate the account in my name?

    No, the balance standing to the subscriber's account may be transferred to the nominee's account after following regulator KYC procedure

  14. I am covered by the NPS. Can I contribute to the GPF?

    No. The General Provident Fund Rules, 1997 also do not apply to you. You will not be permitted to contribute towards GPF.

  15. I am covered by the NPS. Am I eligible to Gratuity?

    No. You will not be eligible to Gratuity.

  16. How does the NPS work?

    When you join Government service, you will be allotted a unique Permanent Retirement Account Number (PRAN). This unique account number will remain the same for the rest of your life. You will be able to use this account and this unique PRAN from any location and also if you change your job.

  17. What is the difference between Tier-I and Tier-II accounts?

    Tier-I account: You will have to contribute 10% of your Basic Pay + DA + DP into your Tier-I (pension) account on a mandatory basis every month. You will not be allowed to withdraw your savings from this account till you retire at age 60. Your monthly contributions and your savings in this account, subject to a ceiling to be decided by the government, will be exempt from income tax.
    Tier-II account: This is simply a voluntary savings facility for you. Your contributions and savings in this account will not enjoy any tax advantages. But you will be free to withdraw your savings from this account whenever you wish.

  18. Will the Government contribute anything to my Tier-I (pension) account?

    Yes. As your employer, the Government will match your contribution (10% of basic+DA+DP) and transfer this amount also to your Tier-I account in your name.

  19. What will happen if I am transferred to another city or country?

    The PRAN number will stay the same and you will be able to use the same accounts from anywhere in the world.

  20. If I leave Government service before I retire will the Government continue to contribute to my Tier-I account?

    No. The 10% contribution by the Government will stop when you leave Government service. However, your savings in your Tier-I and Tier-II accounts will stay in your name and you will be able to continue using these accounts to save for your retirement.

  21. Will the government make any contributions to my Tier-II account?

    No. The government will not make any contribution to your Tier-II account.

  22. When will my contributions start?

    Your contributions (and the matching contribution by the Government) towards your Tier-I pension account will begin only from the month following the month in which you join Government service. During the first month of your service, you will be allotted the PRAN.

  23. Who in the Government will issue me a PPAN open my accounts and be responsible for the deductions?

    a. When you join service, your Drawing and Disbursement Officer (DDO) who will also be responsible for all administrative matters will instruct you to fill out a NPS form(S-1). You will be required to provide your full professional and personal details including details of your nominee in this form.
    b. The DDO will issue you the PRAN number and will also be responsible for all administrative matters related to your NPS accounts including deduction of your contributions, transferring your contributions and the matching contribution of the Government to your Tier-I pension account.
    c. The SIPF District official will transfer the contributions of subscriber through respective current Bank account to Trustee Bank.

  24. What will happen to my contributions to my Tier-I account?

    Your monthly contributions, and the matching contributions by the Government into your Tier-I account, will be transferred by the Government in your name to a Pension Fund Manager (PFM). The PFM will invest your contributions on your behalf. In this way, your savings will earn an interest and grow over time.

  25. Where will my savings be invested?

    Each PFM will offer you a limited number of simple, standard schemes. You will be free to choose any of the following schemes for investing your savings:
    Scheme A This scheme will invest mainly in Government bonds
    Scheme B This scheme will invest mainly in corporate bonds and partly in equity and government bonds
    Scheme C This scheme will invest mainly in equity and partly in government bonds and corporate bonds.

  26. What will happen to my savings in the Tier-I account when I retire?

    You will be able to withdraw 60% of your savings as a lumpsum when you retire. You will be required to use the balance 40% of your savings to purchase an annuity scheme from a life insurance company of your choice. The life insurance company will pay you a monthly pension for the rest of your life.

  27. Whether a retiring Government servant is entitled for leave encashment after retirement under the NPS?

    The benefit of encashment of leave salary is not a part of the retirement benefits admissible under State Pension Rules, 1996. It is payable in terms of Rajasthan Service Rules (RSR) which will continue to be applicable to the government servants who join the government service on after 1-Jan-2004. Therefore, the benefit of encashment of leave salary payable to the governments/to their families on account of retirement/death will be admissible.

  28. Why is it mandatory to use 40% of pension wealth to purchase the annuity at the time of the exit (i.e. after the age of 60 years) from NPS?

    This provision has been made in the New Pension Scheme with an intention that the retired government servants should get regular monthly income during their retired life.

  29. Whether any minimum age or minimum service is required to quit from Tier-I?

    Exit from Tier-I can only take place when an individual leaves Government service.

  30. Whether Dearness Pay is counted as basic pay for recovery of 10% for Tier-I?

    As per the New Pension Scheme, the total Dearness Allowance is to be taken into account for working out the contributions to Tier-I. Subsequently, a part of the “Dearness Allowance” has been treated as Dearness Pay. Therefore, this should also be reckoned for the purpose of contributions.

  31. Whether contribution towards Tier-I from arrears of DA is to be deducted?

    Yes. Since the contribution is to be worked out at 10% of (Basic Pay + DP + DA), it needs to be revised whenever there is any change in these elements.

  32. Who will calculate the interest?

    The DDO should calculate the interest.

  33. What happens if an employee gets transferred during the month? Which office will make deduction of Contribution?

    As in the case of other recoveries, the recovery of contributions towards New Pension Scheme for the full month (both individual and government) will be made by the office who will draw salary for the maximum period.

  34. Whether NPA payable to medical officers will count towards ‘Pay’ for the purpose of working out contributions to NPS?

    Yes. Ministry of Health & Family Welfare has clarified vide their O.M. no. A45012/11/97-CHS.V dated 7-Apr-98 that the Non-Practising Allowance shall count as 'pay' for all service benefits. Therefore, this will be taken into account for working out the contribution towards the New Pension Scheme.

  35. Whether a government servant who was already in service prior to 1-Jan-2004, if appointed in a different post under the Government of State, will be governed by the State Pension Rules or NPS?

    In cases where Government servants apply for posts in the same or other departments and on selection they are asked to render technical resignation, the past services are counted towards pension under State Pension Rules. Since the Government servant had originally joined government service prior to 1-Jan-2004, he should be covered under the State Pension Rules.

  36. Can I get record in the form of pass book of my NPS contributions?

    No. There is no procedure of passbook for your NPS contributions. However after PRAN is generated, legacy Data will also be transferred to PFRDA and thence the account details can be visualized.

  37. As NPS Subscriber for 7yrs., I have been transferred thrice, how will my account be collected and closing balance be known to me?

    The SIPF Officers of respective Districts will upload the respective account of your posting period and it can be seen on website www.npscra.nsdl.co.in with your log in I-PIN.

  38. Who shall be responsible for protecting my interests as a NPS subscriber?

    The Pension Fund Regulatory and Development Authority, the regulator, will protect your interest.