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Government model

Also written NPS Government Model · Government Sector Model

The NPS model that mandatorily covers Central and State Government employees who joined on or after 1 January 2004, with a 10% employee and 14% government monthly contribution.

In plain language

Government employment used to come with a guaranteed pension for life, no saving required. That changed for anyone joining service on or after 1 January 2004.

The Government model of the NPS is what replaced it — a mandatory, defined-contribution account into which both the employee and the government pay every month.

How it works

The Government model covers all Central Government employees (except the armed forces) who joined service on or after 1 January 2004, along with central and state autonomous bodies and various state governments that have adopted it for their own employees. Subscription is mandatory on becoming a covered government employee.

Contribution rate: every month, 10% of salary (Basic + DA) is contributed by the employee, and 14% of salary by the government — a shift from a Defined Benefit to a Defined Contribution pension system for government employees.

Enrolment: the employee's application goes through the Drawing and Disbursing Officer (DDO), who verifies and certifies the details before forwarding it to the Central Recordkeeping Agency (CRA) for PRAN generation.

Investment choice, effective 1 April 2019: subscribers may choose their own pension fund and investment pattern, rather than the default three-PSU-manager allocation (LIC Pension Fund, SBI Pension Funds, UTI Retirement Solutions), which continues as the default option. Choices can be changed once a year for pension fund and up to four times a year for asset allocation. Government employees choosing Auto Choice can pick between Low life cycle (LC-25, max 25% equity) and Moderate life cycle (LC-50, max 50% equity).

Expanded choice from December 2025: Central Government NPS and Unified Pension Scheme subscribers now have six investment choices — the Default Scheme, Active Choice with 100% Government Securities, and four Auto Choice life-cycle funds (LC-25 Low, LC-50 Moderate, LC-75 High, and LC-Aggressive/Balanced holding up to 50% equity until age 45 before tapering). A non-default subscriber must pick one of the five non-default options together with any of ten registered Pension Funds. The Default Scheme's own equity ceiling was raised to 25%, effective 1 April 2025.

Costs and accounts: the government pays the cost of opening and maintaining the Tier I account; the voluntary Tier II account's charges are borne by the subscriber.

A worked example

Mr Sinha joins Central Government service on 15 March 2005 — after the 1 January 2004 cutoff — and is mandatorily enrolled in the NPS Government model. His Basic + DA is Rs 60,000 a month: 10% (Rs 6,000) is deducted from his salary, and the government adds 14% (Rs 8,400), so Rs 14,400 goes into his individual pension account every month.

For years he sits in the default three-PSU-manager allocation. In 2020, following the April 2019 reform, he actively chooses to move to a private-sector pension fund and selects the LC-50 Moderate life cycle fund, capping his equity exposure at 50%. From December 2025, he reviews the newly expanded menu and could, if he wished, switch instead to the LC-Aggressive fund, which holds up to 50% equity until age 45 before gradually tapering — a choice not available to him before the expansion.

Why NISM asks about it

Chapter 4, section 4.1.2 (Models under the NPS), gives the Government model the most detailed treatment of the four NPS models, because it is the largest and most heavily regulated. Expect the 10%/14% contribution split, the 1 January 2004 cutoff, the 1 April 2019 investment-choice reform, and the December 2025 six-choice expansion as direct recall points.

Common exam traps

  • 10% is the employee's share; 14% is the government's share — easy to reverse, and the two figures also differ from the Corporate/All Citizen model's more flexible contribution structure.
  • 1 January 2004 is the cutoff for Government model coverage, the same date that separates Defined Benefit (Old Pension Scheme) from Defined Contribution (NPS) for Central Government employees.
  • Pension fund choice can change once a year; asset allocation can change up to four times a year — two different frequencies for two different choices.
  • The government pays Tier I costs; the subscriber pays Tier II costs — a distinction that also applies across the All Citizen and Corporate models.

Check yourself

  1. 1.In which of the following models of the NPS is the contribution ALWAYS solely by the subscriber?

    1. a)Government model
    2. b)State government model
    3. c)Corporate model
    4. d)All citizens model
    Show the answer

    Answer: (d) All citizens model

    This is the workbook sample question, and the word "always" decides it.

    In the All Citizen Model, the subscriber signs on DIRECTLY for this model and makes PERIODIC VOLUNTARY CONTRIBUTIONS. There is no employer anywhere in the picture, so the contribution can only come from the subscriber.

    ⚠️ The Corporate model is the trap. Contribution there may be made by THE EMPLOYER ALONE, EMPLOYEE ALONE, OR THE EMPLOYER AND EMPLOYEE IN ANY DECIDED PROPORTION — employee-only is possible, which is exactly why it fails a question asking for "always".

    In the Government and State government models the employee contributes 10% of Basic + DA and the government 14% — never solely the subscriber.

  2. 2.Which of the following places the NPS milestones in the correct chronological order?

    1. a)All Citizen model in 2004 → Government model in 2009 → Atal Pension Yojana in 2011 → Corporate Sector model in 2015
    2. b)NPS for Central Government employees joining on or after 1 January 2004 → extension to all citizens in May 2009 → Corporate Sector model in 2011 → Atal Pension Yojana in 2015
    3. c)Corporate Sector model in 2004 → Government model in 2009 → All Citizen model in 2011 → Atal Pension Yojana in 2015
    4. d)Government model in 2004 → Atal Pension Yojana in 2009 → Corporate Sector model in 2011 → All Citizen model in 2015
    Show the answer

    Answer: (b) NPS for Central Government employees joining on or after 1 January 2004 → extension to all citizens in May 2009 → Corporate Sector model in 2011 → Atal Pension Yojana in 2015

    The workbook's opening paragraph gives the sequence. NPS was launched by Govt of India for Central Government employees (excluding Armed Forces) joining services on or after January 1, 2004, was then adopted by various state governments, and in May 2009 was extended to all citizens of India on a voluntary basis. The NPS Corporate Sector model was launched in 2011, and the Atal Pension Yojana (APY) was launched in 2015 to provide a guaranteed pension cover to people in the unorganized sector. So option B is correct.

    Why the others are wrong:

    • Option A puts the All Citizen model first. It came five years after the Government model, and the Corporate model (2011) came before APY (2015), not after it.
    • Option C starts with the Corporate model. That was the third step, in 2011, not the first.
    • Option D puts APY in 2009 and the All Citizen model in 2015. Those two dates are reversed: 2009 is the all-citizens extension and 2015 is APY.

    A related date to keep: the PFRDA was initially established in 2003 as an interim regulator and became the statutory Authority with the PFRDA Act 2013 and its notification on February 1, 2014.

  3. 3.Kavita, an All Citizen model subscriber registered through PoP 'A', wants to activate a Tier II account. Which statement is CORRECT?

    1. a)She may activate Tier II through any PoP of her choice, and must complete fresh KYC for it
    2. b)She must pay an account-opening charge for Tier II, and her Tier I nominations will automatically apply to it
    3. c)She must activate Tier II through PoP 'A'; no separate KYC is needed as she already holds a PRAN card, there is no opening charge, and she must make fresh nominations because Tier I nominations do not apply to Tier II
    4. d)She cannot open Tier II until her Tier I account has completed three years
    Show the answer

    Answer: (c) She must activate Tier II through PoP 'A'; no separate KYC is needed as she already holds a PRAN card, there is no opening charge, and she must make fresh nominations because Tier I nominations do not apply to Tier II

    Four Tier II rules apply to Kavita:

    • Which PoP: for NPS subscribers under the All Citizens Model, the PoP through which the Tier II account is activated should be the same as the one through which the Tier I account was registered.
    • KYC: no separate KYC formalities need to be complied with for the Tier II account for subscribers who have already complied with the same at the time of opening the Tier I account and have been issued a PRAN card.
    • Cost: there are no charges for opening a Tier II account.
    • Nominations: the nominations made in the Tier I account of the subscriber will not be applicable to the Tier II account.

    So option C is correct.

    Why the others are wrong:

    • Option A describes the Government-model rule. Subscribers who have registered on the NPS under the government model may activate the Tier II account through any PoP. It also wrongly requires fresh KYC.
    • Option B gets both the charge and the nominations wrong.
    • Option D invents a waiting period. Tier II may be opened along with the Tier I account or subsequently at any time provided the subscriber has an active Tier I account. The three-year period belongs to partial withdrawal from Tier I.

Where this is taught

Free preparation for NISM Series XVII

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