What is Contributory Pension? | How to invest in Contributory Pension plan? | Risks & Benefits

The state and central government employees are only eligible to join in this plan because according to this plan along with the pensioner the government also invests some amount in the account of the pensioner. This contributory pension is replaced to that of the GPF investments where there occurred many problems in the past.

ü  This scheme is applicable only to those who join in the government jobs only after September 1, 2004.

ü  The government invests the total amount that is invested by the investor including the basic + DA which is 10%.

ü  There are in total 3 pension options to the government employees…first is the less risk factor based debt where the investors invest very less in equities and high in money market. The second one is investing high in equity and less in debt schemes and the third one is investing equally in debt and equities. Depending on the risk factor, the investors can choose any one option for their money to get invested.

ü  At present the ICICI prudential, IDFC, Kotak Mahindra, Reliance Capitol, SBI, UTI are acting as the fund managers for almost all these pension plans.

ü  As soon as the account is opened they issue the Permanent account number (PAN) and these accounts are look after by the Central Record Keeping Agency.

ü  The contributory pension accounts are called as the Tire-1 investments and the withdrawals are not accepted in between them. There are special Tire 2 accounts for those who wish to withdraw the money in between the tenure period. This account is same as the savings account where the investors can take the money and invest when ever is needed.

ü  The investor can quit from this scheme when he is 558 or 60 years but the investors can get only 60% of cash during the time of quitting and the remaining 40% must be  invested in the IRDA recognized annuity plans.

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