The State Government has issued orders for implementation of National Pension System (NPS) for all appointments made after April 1, 2013.
The NPS will work on a defined contribution basis and will have two tiers.
MADE MANDATORY
Contribution to tier I will be mandatory for employees whereas tier II will be optional and at the discretion of the employees.
In tier I, the employee will make a contribution of 10 per cent of his/her basic pay + dearness allowance to be deducted from salary every month. The Government will make a matching contribution.
The amount so deducted from salary and the matching contribution will be transferred to a pension account in order to invest the same as per provisions of Government of India/Pension Fund Regulatory and Development Authority (PFRDA).
The entire amount under tier I (employee contribution + matching Government contribution + investment returns) will be kept in a non-withdrawable pension tier I account.
SEPARATE ACCOUNT
Tier II contribution will be kept in a separate account that will be made available at the option of the employee concerned. The Government will not make any contribution to the tier II account.
Pension funds of employees will be managed by pension fund managers nominated by the PFRDA. National Securities Depository will be the central record keeping agency of the scheme.
A Government servant can exit at the retirement age from tier I of the scheme.
At exit, it would be mandatory for him/her to invest 40 per cent of the pension wealth to purchase an annuity which will provide for pension for the lifetime of the individual and his/her spouse/dependent parents.
LUMP SUM
The employee will receive a lump sum of the remaining pension wealth, which the individual would be free to utilise in any manner. In the case of employees opting to leave the scheme before attaining the retirement age, the mandatory annuitisation would be 80 per cent of the pension fund.
The scheme will apply to all employees to whom Part III of Kerala Service Rules (KSR) is applicable. It will also apply to public sector undertakings where pensionary benefits as per Part III of KSR are granted.
The guidelines, detailed accounting procedure to be followed in the scheme and necessary amendments to KSR will be issued separately, the Government order said.