7th Pay Commission to get Cabinet nod soon, here’s why you will get 10 per cent less arrears in hand
The 7th Central Pay Commission
recommendations are likely to be cleared by the Union Cabinet on
Wednesday, leading to a much-awaited bonanza for 47 lakh central
government employees and 53 lakh pensioners in the form of higher
salaries and arrears from January 1, 2016, the date from which the
recommendations will be made applicable.
However, if you are one of the
working central government employees your arrears would come with a 10
per cent applicable deduction, that would be passed on to the National
Pension System (NPS). Similar deductions are applicable to the increased
salary component.
The 10 percent deduction from
arrears and salary will come with a matching contribution from the
government into the NPS for managing for creating a pension corpus at
the time of retirement.
“The arrears that Central
government employees will get with effect from January 2016 will come
with 10 per cent deduction which will flow into their individual
accounts under the NPS. There will be a matching contribution from the
government,” Chairman, Pension Fund Regulatory and Development Authority
(PFRDA), Hemant Contractor, told FeMoney.
It is expected that the increased salary and arrears would take effect from August 1, 2016.
Contractor said that the total
amount that would flow into the NPS kitty from the 7th Pay Commission
would be substantial. “We are expecting the money arising out of 7th
Central Pay Commission recommendations will be released soon. The
increased flow would be substantial. However, we have not been able to
make an exact calcuation on the amount since we do not know the payment
schedule. The amount would depend on the time and amount of arreards
released in each tranche if it is released in parts,” the PFRDA Chairman
said.
NPS is applicable to all
employees joining services of Central Government, including Central
Autonomous Bodies (except Armed Forces) on or after January 1, 2004.
Many State Governments have adopted NPS architecture and implemented NPS
mandatorily for their employees joining on or after a cut-off date.
A subscriber contributes 10 per
cent of his salary plus DA into his Tier-I (pension) account on a
mandatory basis every month which is invested along with the matching
contribution from the employer.
The accumlation is managed by
select pension fund managers (PFMs) as per guidelines laid down by PFRDA
and is used for old age income benefit of subscribers. The pension
regulator administer the National Pension System.
The 7th Pay Commission has
recommended a 23.55 per cent hike in pay and allowance. While pay will
go up by 16 per cent, increase in allowance will be 63 per cent and
increase in pension 24 per cent. The impact the 7th Pay Commission
recommendations on the government coffers will be to the tune of Rs 1.02
lakh crore, with Rs 73,650 crore impactg on the Union Budget and Rs
28,450 crore on the Railway Budget.
Source : http://www.financialexpress.com/
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