NPS Vs ODPS

hi guys,

I am not an economist, generalist nor  researcher. I am just stupid common government employee afraid of my future. As I am coming under NPS scheme I just did some comparisons and calculations to ensure NPS is better than OLD DEFINED PENSION SCHEME(ODPS), but result is heartbreaking.( I wish my calculation to go wrong)....

First of all let me put merits and demerits of OLD PENSION SCHEME

     Merits

1.   deleted
2.  There is No deduction from our salary
3. There is no market risk, we are assured of getting 50%(33 years Service) of last Drawn salary at the time of retirement.
4.  There will be Family Pension to spouse or children.
5. Pension amount dependent on DA , pension amount raise as cost of living.

     Demerits:

1.   deleted

Now the NPS.

Merits

1.   There is a definite amount in our individual  account 10% from Our side and 10% from Govt. side
2.  We are assure of Getting 60% of Total money at superannuation and we will get pension through annuity on 40% of remaining. 

Demerits:

                        NPS assured to give us Lumpsum amount at the time of superannuation. i.e., if we have 1 Crore (we can say 50 lakh employer and 50 lakh employee side amount) accumulated corpus in our individual account, 60 lakh will be given to us at the time of retirement. and need  to purchase annuity of 40 lakhs , our pension solely depend on the interest we earn on 40 lakhs.Spouse will also get same pension. There is no clear guidelines what will happen to that 40 lakhs after spouse death 

( read some article which says after age of 70 that 40 lakhs will be returned). 

   Here are the few demerits of NPS.( Known to me)

1. we are presented with huge amount at the age of 60, by then most of our commitments  like house,vehicle,children education , chidren marriage will be over( most of the cased by taking loan not  less than 10% of interest), so in my view huge money at that age is of no use, we need money now( 10% deduction from salary should be stopped).
2. Let us take we are getting 60 lakh as one time amount, out of which 50 lakh is our hard earned money, Govt. share is only 10 lakh.
3. Now big issue if interest rate is fixed for annuity we purchased on 40 lakhs, the pension what we get at the age of 61 will remain same till our death without accounting inflation, cost of living etc. In old pension scheme DA raise is effected to pensioners also.
4. Most dangerous wrong fund managers, market risk we are not assure of what pension amount we are going to get.
5. Salary deduction(although our gross look good with employer contribution) is reducing our lifestyle, we are less paid compared to private sector we are not able to go in parallel with them in life.
6. In this globalization era privatization is inevitable, if our boards, corporations privatized govt has no responsibility to pay us pension if we are in NPS.

 Calculation of corpus amount

            Here is the chart  got through some calculator what will be total corpus money in my account taking in to account of average inflation and interest from 2007 , 33 years considered, base value the deduction in the May 2007 salary 1884+1884=3768, refer link below(just check it with personal finance advisers..or other knowledgeable person as I am having very minute knowledge about finance)

Sl.No.	Inflation	Interest	Total Money accumulated
1	7%	10%	2,40,57,627.00
2	10%	10%	3,57,49,602.00

1).http://www.thecalculatorsite.com/finance/calculators/compoundinterestcalculator.php

Here is some calculations:

What will be my salary in 2040?

here are few methods

1st Method:(remember i am not economist its all layman thinking)

In 2007 May I got Basic+ DA=18840

In 2014 August I got Basic+DA=47635

Next DA is 4% also we consider January 2015 DA as 4% adding one increment our salary in May 2015 will be=50692.00

That means in 8 years growth of 170%....taking average per year growth is more than 20%, we will take 20% for calculation

20%x 33 years =660% hence salary will be in 2040 is 1,43,250

2^nd Method:(Refer the chart generated for corpus calculation)

Considering 7% inflation

33 rd year 20% contribution(NPS) is =394070

                   10% contribution              = 197035

Per month contribution=197035/12=16419.00

Hence salary will be =1,64,190

3^rd  Method (Refer the chart generated for corpus calculation)

Considering 10% inflation

33 rd year 20% contribution(NPS) is =954678

                   10% contribution              = 477339

Per month contribution=477339/12=39778.25

Hence salary will be =3,97,782.00 

 Pension calculation and comparison(Considering last Two cases)

Old Pension scheme

Case	33 rd year last month salary	Pension Per Month
7% inflation	1,64,190	82,095
10% inflation	3,97,782	198891

New Pension Scheme

Case	33 rd year salary	Money accumulated	Considering whole amount invested and 8% interest monthly pension	As per scheme 40% kept for annuity  pension will be
7% inflation,10% interest	1,64,190	2,40,57,627.00	160384.00	64153.00
10% inflation,10% interest	3,97,782	3,57,49,602.00	238330.00	95332.00

 hmmm.... by all means ODPS is good. This is my first blog just created to share my doubts and concern about my future so that i might get good suggestion or correction in my thoughts through the knowledgble persons, economist, financial advisers., so that i can leave happily without thinking much about future.

I am not a generalist , writer or English freak created this blog to get positive thoughts from you people.