New Pension Scheme from April 1, What you should know?

Pension Scheme: Big news for pensioners. The Kerala government on Saturday issued orders to implement a ‘Defined Pension Scheme’ for its employees from April 1, 2026. The decision follows Finance Minister K N Balagopal’s announcement in the state budget to replace the National Pension System (NPS) with a ‘Defined Pension Scheme’ that would guarantee a minimum pension.

Employees can choose a fixed pension plan

According to information provided by the minister’s office, employees joining government service from April 1, 2026, can choose the ‘Defined Pension Scheme’ or remain under the NPS. Balagopal said in a statement that existing employees currently enrolled under the NPS will also be given the option to switch to the “Defined Pension Scheme.” The maximum pension under this scheme will be 50 percent of the basic salary received at the time of retirement, which will be determined based on the pay scale approved by the state government. In addition to the pension amount, dearness relief (DR) will also be payable.

Must have completed 30 years of service

To be eligible for the maximum pension, employees must complete 30 years of qualifying service. The Minister clarified that detailed guidelines for the scheme will be issued separately.

Meanwhile Pension Fund Regulator (PFRDA) has made a major change in the rules of National Pension System i.e. NPS. It is claimed that this will provide great relief to employed people. Many new provisions have been made in the new rules, ranging from increasing the age limit for remaining in NPS. These changes are for both government and non-government employees. The first change introduced by the PFRDA relates to the age limit. Now, individuals can remain in the National Pension System until the age of 85, up from 75 years previously.

The second change relates to pension fund amounts. Now, only 20% of the funds must be set aside for pensions. At retirement or in certain circumstances, private sector employees can use at least 20% of their total funds to purchase an annuity. Previously, if your corpus exceeded ₹5 lakh, you had to use at least 40% of your corpus to purchase an annuity. This means you can now access more cash. The third change concerns withdrawals. In some cases, the entire amount can be withdrawn at once. Government and private subscribers with a deposit of Rs 8 lakh or less can withdraw 100% of their deposits.

Government employees have the option of investing 40% of their funds in annuities if they don’t want to withdraw the entire amount. Private employees, on the other hand, must use at least 20% of their funds for annuities.