Sir
The employees recruited after Jan 2010 are governed by New Pension Scheme implemented by the State of Jammu and Kashmir. But this scheme denies the pensionery benefits to the employees at the time of retirement due to the following disadvantages. We want the State Government to revoke the new pension on the following grounds :
There are restrictions on premature withdrawal from Tier I account making the scheme very rigid. There is an option to prematurely withdraw 20% of amount but it leads to closure of account. Even on maturity, only 60 percent of fund can be withdrawn and the rest has to be compulsorily used to buy an annuity. Hence, there are liquidity issues.
The exposure to equity investment is restricted at 50%. People in the young age group who can take higher risks may see this as a disadvantage as they might be losing an opportunity, as equity investments can give good returns. Also, equity investment is restricted to index funds which replicate the BSE SENSEX or NSE NIFTY which means losing out on opportunities to get good returns from other stocks.
The most crucial concern is in relation to taxation at withdrawal.NPS currently comes under the EET (exempt, exempt, tax) regime and Current laws state that the funds will be taxed at withdrawal.
Returns from annuity insurance plan obtained after retirement will not be tax free. The proposed Direct Taxes Code (DTC) seeks to exempt NPS funds from tax at withdrawal. However, it is not clear if the DTC provides for tax exemption on returns from annuity plan as well.
There is uncertainty over the DTC itself with the Finance Minister calling for a review.6. No guarantee on returns: – The NPS is not a defined benefit plan. It is a defined contribution plan. The returns are market linked and there is no guarantee of getting good returns. This is not only a disadvantage, but uncertainty as well.
Yours etc…
Ajaz Malik
President Employees Association
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