Government of India have introduced a new restructured defined contributory pension system, namely 'New Pension Scheme' for its employees (except Armed Forces) recruited on or after 01.01.2004 replacing existing system of defined pension scheme vide Notification F. No.5/7/2003-ECB&PR dated 22/12/20003 Department of Economic affairs, Ministry of Finance, Government of India. Accordingly, the scheme was made applicable to All India Service (AIS) officers recruited to Kerala Cadre on or after 01.01.2004. As per GO (P) No.20/2013/Fin dated 07.01.2013, State Government adopted National Pension System (NPS) and implemented for all appointments made on or after 01.04.2013.

The System is working on a defined contribution basis and has two tiers viz.,Tier- I and Tier - II. Contribution to Tier I is mandatory where as Tier II is optional and at the discretion of the employee. The employee shall make a contribution of 10% of his/her Basic Pay and Dearness Allowance to Tier I. The Government will also make a matching contribution. The entire amount including returns from investment will be kept in Tier I account. The pension funds of employees will be managed by Pension Fund Managers (PFMs) nominated by the Pension Fund Regulatory and Development Authority (PFRDA) and records will be maintained by National Securities Depository Limited (NSDL) that functions as the Central Record Keeping Agency (CRA). At exit, it would be mandatory for the employee to invest 40% of his/her pension wealth to purchase an annuity from Annuity Service Providers (ASPs) which will provide pension for life time of the employee.

The rules and regulations for the management of NPS implemented in the State will be governed by directions /rules /circulars / orders etc issued by Government of India/State Government/PFRDA/NSDL from time to time. In order to facilitate and monitor all the NPS related activities in the State, Additional Secretary (Pension) has been designated as State Nodal Officer (SNO). The Finance (NPS Cell) Department is the authority dealing with the subject of National Pension System in the State.