Pension calculator: This NPS option for government employees about to retire is better, say money gurus

Pension calculator: NPS (National Pension Scheme) assumes great importance for government employees about to retire because from January 1, 2006 a government employee is given two options to decide her or his pension post-retirement — 50 per cent of the last pay or average emoluments for last 10 months, whichever is more. Though, it is auto decided by the government, but an employee must calculate his or her pension from both options and match it with the first pension they are getting credited into their pension account.

Speaking on this pension calculation, Kartik Jhaveri, Director — Wealth Management at Transcent Consultants told Zee Business Online, "Pension calculation is one of the most important things that a government employee must take care of while retiring. Generally, it has been found that the average of the last 10-month pay is more than the 50 per cent of the last pay as Dearness Allowance (DA) has a major role in it. A government employee gets DA added to his or her salary on a quarterly basis and hence last ten-month average is generally found higher than the 50 per cent of the last month salary. However, if the person has got a promotion, in such a case his or her salary band gets changed due to hike in basic of the salary. So, in such a situation, 50 per cent of  the last month salary is advisable." 

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With effect from 1 January 2006, minimum pension presently is Rs 9000 per month. The maximum limit on pension is 50 per cent of the highest pay in the Government of India. Pension is payable up to and including the date of death. A retired government employee has an option of commutation of his or her pension but not above 40 per cent of the pension. If the retired person decided for commutation within one year of his or her retirement, there is no need for his or her medical examination but if it's more than one year, then a thorough medical examination of the retired government employee is a must.