The Government employees are demanding the reimplementation of the old pension scheme when the new pension scheme offers so many benefits. Both the schemes under the National Pension System or NPS offer monthly pensions to the Government employees.
Old Pension Scheme vs New Pension Scheme, Which is Better
Although the states, including Rajasthan, Himachal Pradesh, Jharkhand, Chhattisgarh and Punjab, have reimplemented the old pension scheme, the debate is still on. So, let’s analyze the benefits offered by both schemes and decide which is the best option.
About the Old Pension Scheme
The Old Pension Scheme guarantees retired government employees a stable income for life after they retire. In this system, retired government workers receive a pension every month, which is 50% of their last salary plus a dearness allowance. They also benefit from semi-annual adjustments to the dearness allowance (DA). It’s important to note that there are no deductions from their salary during their years of service in this scheme.
Benefits of the Old Pension Scheme
- The Old Pension Scheme provides a stable monthly income for life.
- It doesn’t require taking money from your salary, reducing your financial burden.
- You won’t pay taxes on the pension income from OPS.
- You can choose to save extra money in the General Pension Scheme for your retirement.
- The money you receive after retiring is tax-free.
About the New Pension Scheme
The National Pension System (NPS) is diligently supervised and administered by the Pension Fund Regulatory and Development Authority (PFRDA). Within the NPS framework, there exist two distinctive tiers: Tier I and Tier II accounts. In Tier I accounts, investments are securely preserved until the retirement milestone, whereas Tier II accounts provide the option for premature withdrawals, offering a level of flexibility.
Benefits of the New Pension Scheme
- You can save on taxes by up to Rs 1.5 lakhs through Section 80 CCD (1) of the Income Tax Act.
- It’s beneficial for both government and non-government employees.
- The NPS Tier II account lets you withdraw your money whenever you need it for added flexibility.
Now Old vs New Pension Scheme, Which Offers Max Benefits:
Both schemes have their own set of benefits. However, the old one only offers the benefits and perks to Government employees only. On the other hand, the NPS opens the door to pension benefits to all citizens.
“The NPS investment aids private sector salary earners in securing their future after retirement. In addition, NPS allows investors to avail tax benefits. The only benefit that makes OPS stand out is that it doesn’t require a deduction from salary. If you are not a government employee, then NPS investment could be a better choice for you,” mentioned zeebiz.com