What Are NPS Settlement Rules For Voluntary And Compulsory Retirement?

The Department of Pension and Pensioners’ Welfare (DoPPW) has issued new guidelines for settling pension accounts under the National Pension System (NPS) for central government employees taking voluntary retirement or retiring compulsorily due to removal or dismissal from service.

Here are the details of the office memorandum/circular issued by DoPPW on October 11, 2024.

Voluntary Retirement:

Rule 12 of the Central Civil Services (2021) deals with NPS settlement on voluntary retirement.

Rule 12 provides for entitlement on voluntary retirement from government service concerning central government servant covered under NPS. As per the rule, at any time an employee covered under NPS completes 10 years of regular service may retire from service by giving a prior written notice of not less than three months to the appointing authority.

The retirement will be effective from the date mentioned by the employee in notice (not less than three months), provided the appointing authority has no objection and grants permission.

However, the government may also accept a retirement notice of less than three months, provided the appointing authority accepts the reason provided in a written request from the government. The authority has the power to reduce the notice period based on the merit of the request and administrative requirements to redress any likely inconveniences.

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Once the notice is sent, the employee can only withdraw it by sending a fresh request to the appointing authority before the 15-day expiry date. Whether to accept or reject the withdrawal request will be at the discretion of the appointing authority.

On retirement, the employee will receive the benefits as per the 2015 NPS rules for exit and withdrawal offered by the Pension Fund Regulatory and Development Authority (PFRDA).

They can also continue the account in the individual capacity, or delay the withdrawal of the retirement benefits as per PFRDA rules.

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When Will This Rule Not Apply?

Rule 12 will not apply if they retire under the Special Voluntary Retirement Scheme for surplus employees, or for being absorbed in a public sector undertaking or an autonomous body.

Compulsory Retirement:

Rule 18 of the Central Civil Services (Implementation of NPS) Rules, 2021, will apply for compulsory retirement, when the employee is removed or dismissed from service.

According to the DoPPW circular, “Rule 18 provides for the effect of compulsory retirement or dismissal or removal from government service on the accumulated pension corpus under NPS in respect of central government civil employees.”

The lumpsum and annuity will be paid as per rules to the individual exiting from NPS before superannuation. However, such employees can continue to subscribe to the NPS as non-government subscribers. Gratuity and other retirement benefits are not covered under this rule and are dealt with separately under the rules applicable to them.