Big news for government employees. The Central Pension Accounting Office (CPAO) of the Central Government rolled out new guidelines on March 12, 2025, aimed at ensuring timely pension payments for retired employees under the National Pension System (NPS). These guidelines instruct that NPS pension cases should be handled similarly to those under the old pension system (OPS).
In a memo dated March 12, 2025, the CPAO emphasized that the procedures for NPS should mirror those of OPS, as previously directed on December 18, 2023. They reminded all officers involved in the pension process to adhere to the OPS procedures. However, it seems that some Pay and Accounts Offices (PAOs) are still mishandling pension cases.
Here’s what you need to know about the new order:
The CPAO pointed out that certain Pay and Accounts Offices are submitting temporary Pension Payment Orders (PPOs) in triplicate, when only two booklets are necessary—one for the pensioner and one for the distributor. This extra paperwork is causing delays in processing pensions. The CPAO has urged all relevant officers, including Principal CCAs, CCAs, AGs, and authorized bank CPPCs, to strictly follow the established guidelines to ensure pensions are released promptly.
Key points about NPS:
The NPS is a contributory scheme where government employees contribute 10% of their basic salary towards their pension, while the state government contributes 14%. Upon retirement, employees receive 60% of the accumulated amount, with the remaining 40% allocated for their pension.
In the New Pension Scheme (NPS), there is no ongoing gratuity provided upon retirement. Additionally, the Dearness Allowance (DA) that is received after six months does not apply within the NPS framework.
The NPS operates based on the stock market and does not include any provisions for dearness allowance. However, it does allow for 50 percent of the total salary to be allocated as a pension for the employee’s family in the event of the employee’s death while still in service. It’s important to note that any funds received upon retirement, determined by stock market performance, are subject to taxation.
Key features of the Old Pension Scheme (OPS) include:
In the OPS, when a government employee retires, they receive a pension for life that amounts to half of their last basic salary plus dearness allowance, funded by the government treasury. The dearness allowance in OPS is adjusted twice a year. If a pensioner passes away, their family is also entitled to receive a pension under this scheme.
Moreover, employees in the OPS are eligible for gratuity upon retirement. The dearness allowance (DA) becomes applicable to employees after a six-month period. Following the Pension Commission’s implementation, retired employees benefit from a revised pension. Additionally, retirees do not have to pay income tax on the interest accrued from their General Provident Fund (GPF).