Model Answer 1. Nature of the Scheme NPS: A defined contribution pension scheme where both employees and employers contribute to the fund, and the returns are market-linked. OPS: A defined benefit pension system where government employees receive a fixed pension based on their last drawn salary, aloRead more
Model Answer
1. Nature of the Scheme
- NPS: A defined contribution pension scheme where both employees and employers contribute to the fund, and the returns are market-linked.
- OPS: A defined benefit pension system where government employees receive a fixed pension based on their last drawn salary, along with dearness relief adjustments twice a year.
2. Eligibility and Risk
- NPS: Open to all Indian citizens between the ages of 18 and 65. The pension amount depends on market performance, so it involves a degree of investment risk.
- OPS: Exclusively available to government employees. It guarantees a fixed pension, with no associated risk.
3. Tax Benefits
- NPS: Contributions of up to ₹1.5 lakh annually are tax-deductible under Section 80C, with an additional ₹50,000 under Section 80CCD(1B).
- OPS: No specific tax benefits are applicable to OPS subscribers.
4. Pension Amount
- NPS: 60% of the pension corpus can be withdrawn as a lump sum at retirement (with 60% being tax-free), while the remainder must be invested in annuities.
- OPS: Provides a fixed pension amount of 50% of the last drawn salary, along with regular dearness relief adjustments.
Rationale Behind the Introduction of NPS
The New Pension Scheme (NPS) was introduced in 2004 to address the growing financial strain caused by the Old Pension Scheme. Several key factors led to this shift:
- Increasing Pension Liabilities: The government’s pension obligations were escalating rapidly, especially due to rising life expectancy and improved healthcare. By 2020-21, the central government’s pension bill had increased by 58 times compared to 1991ustainable Nature of OPS:** OPS posed a financial burden, with pension liabilities threatening the fiscal health of state governments. For example, Himachal Pradesh‘s pension bill accounted for nearly 80% of the state’s own tax revenues .
- Poand Flexibility: NPS introduced a system of portability, allowing employees to carry their pension across different jobs and locations, unlike OPS. This was designed to encourage retirement savings and provide a more sustainable financial solution .
To become a CEO of a company a combination of factors matters but if I had to rank them I would say Experience (60%) in leadership roles, industry knowledge and a proven track record of success are crucial. A CEO needs to have a deep understanding of the business, its operations and its challenges.Read more
To become a CEO of a company a combination of factors matters but if I had to rank them I would say
While these factors can vary in importance depending on the company, industry and specific circumstances, experience is generally the most critical factor in becoming a CEO.
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