7th CPC recommends to review NPS Contribution Rates and Period of Contribution

7th CPC recommends to review NPS Contribution Rates and Period of Contribution

Contribution Rates

In DCS, typically, the employees as well as the employers contribute towards a pension fund. As discussed earlier, the quantum of pension payouts would also depend upon the contribution rates. Higher the contribution rate, better would be the pension payouts. The contribution rates for both the employees and the employers vary across the globe. The Commission has received suggestions that the government’s contribution should be enhanced from the present 10 percent in aid of a higher payout under the NPS. Associations and individuals have made presentations before the Commission highlighting that forecasts suggest that a 10 percent contribution from government will not be adequate to provide reasonable post retirement financial security in all cases. The Commission, therefore, recommends that this important aspect should be re-examined in detail by an expert body for making course corrections if required.

Period of Contribution

The Commission notes that time is of the essence in building up a reasonable corpus and ensuring that effects of compounding are significant. It is therefore essential that contributions by individuals and corresponding contributions by government are made in time, and more importantly, are deployed without any loss of time. Any delays in this respect, particularly in the initial years can have a large impact on the eventual corpus.

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