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National Pension System (NPS)

Posted in Finance, India, Investment.

PFRDA (Pension Fund Regulatory and Development Authority), India has opened National Pension System (NPS) / New Pension Scheme to all Indian citizens starting today, on 1st May, 2009.

Its a safe, flexible and portable scheme introduced by Indian Government’s cell PFRDA; to replace the existing System of Pension System in the country and to provide income security after retirement.

PFRDA was established by the Government of India to promote old age income security by establishing, developing and regulating pension funds, to protect the interests of subscribers to schemes of pension funds.

National Pension System (NPS) Highlights

Any Indian citizen will be able to start a National Pension System account and can start investing any amount up for a pension.

  • Open to all citizens aged between 18-60 years
  • Exit age for national pension system will be 60 years.
  • Attractive investment schemes to choose from
  • Professional record-keeping and fund management
  • Technology driven, Transparent fee based system
  • Withdrawal facility as and when you wish, under Tier II
  • No entry and exit loads
  • Multiple fund managers
  • Multiple investment options
  • Minimum Contribution per installment: Rs 500
  • Minimum Contribution per year: Rs 6000
  • Minimum Contributions per year : 1

Under this scheme, an investor can deposit their contributions in Bank Branches and Post offices all over the country. Unlike EPF (employee provident fund schemes), there will be only one number allotted to each investor, In case of change of job or location of job, it can be easily transferred to another branch. Each Investor will be allotted a unique 16 digit Permanent Retirement Account Number (PRAN) it will valid for life like current PAN number. There will be no need to open a new account every time you change job or location unlike the current EPF (Employee Provident Fund)

In starting, there will be 23 Points of Presence (POP) including PSU banks and post offices, and they will be provide account opening and other transactions facility. Following is the participating POP list: Allahabad Bank, Axis Bank, Bajaj Allianz General Insurance Co, Central Bank of India, Citibank, CAMS (Computer Age Management Services), ICICI Bank, IDBI Bank, IL&FS Securities, Kotak Mahindra Bank, LIC (Life Insurance Corporation of India), Oriental Bank of Commerce, Reliance Capital, State Bank of Bikaner & Jaipur, State Bank of Hyderabad, SBI (State Bank of India), State Bank of Indore, State Bank of Mysore, State Bank of Patiala, State Bank of Travancore, South Indian Bank, Union Bank of India, UTI.

There will be multiple choices of investment and pension fund managers. All records will be kept by Central Record-keeping Agency (CRA). Central authorities and fund manager will be providing performance reports and NAVs (Net Asset value) regularly, so investor can track and invest accordingly. In Starting, NAVs will be declared once every year and switching fund manager will be allowed only once a year.

Currently seven fund managers have been chosen LIC Pension Fund Limited, SBI Pension Funds Private LimitedIDFC Pension Fund Management Company LimitedKotak Mahindra Pension Fund LimitedReliance Capital Pension Fund LimitedUTI Retirement Solutions Limited and ICICI Pension Fund Management Company Limited that will manage investment money for NPS.

Fund Managers will charge very low fund management charges as compared to mutual funds.

Investment Options:

Individual will also have choice to choose from 3 different asset classes: equity (E type), Govt securities(G Type) and Credit Risk-bearing Debt/fixed income based investments (C Type).

Active Choice investment: Investor can mix these three types also as per his choice. Invester actively decide as to how NPS investment is divided into 3 options (E, C and G).

Auto Choice investment: Another option will be Auto Choice life cycle fund and the investment allocation will be done based of investor’s age. In this scheme, equity portion (Asset class E) will be 50 per cent till age 35 after which it will reduce 2 per cent per year until it becomes 10% by age 55. Credit risk portion (Asset class C) will be 30 per cent till age 35 after which it will reduce 1 per cent per year until it becomes 10% by age 55.

Investor will have option of investing monthly/quarterly, but minimum 4 investments in a year will be compulsory.

As per the notification by PFRDA, Currently only half of investment can go into equities, even if investor chooses the equities type funds. This limit will only be reviewed after a year. Deepak Parekh had suggested PFRDA to allow public to invest all saving in equities but board was not ready to do that.

There will be regular account statements and information desks to keep information transparent.

Govt has extended Swavalamban initiative under which it will contribute 1,000 Rs per year (for a period of four years) to every national pension system (NPS) account opened this year with at least a matching contribution from the subscriber.

How to make investment in NPS

Biggest problem is investment is that, a person has to visit personally to POP office every-time he/she need to make contribution.   There has been some respite to investors as some of the POPs have started taking deposits online.

India’s largest bank State Bank of India has started taking NPS contribution online through the onlineSBI login account. If you have internet banking of SBI, you can make payment to NPS online. You can check NPS contribution section under Payments/Transfers tab after login.

If you have NPS account opened with ICICI and you also have bank account with ICICI, you can also transfer amount online to NPS account. You need to add NPS account as biller in online ICICI account. You can go to ‘Bill Pay’ section and add a biller under Pension category. Once biller is added you can make payment to this account.  The facility for online contribution payment towards national pension system (NPS) is allowed only for NPS accounts opened through ICICI Bank. Your registration for NPS contribution will be cancelled if the NPS account has not been opened through ICICI Bank. Any payments made towards such account will be reversed within three working days. Please make contribution towards the above NPS account only after you have received confirmation for registration into the mail box of your Internet Banking account.

NPS account holders can also invest through SIP or in lump-sum from their ICICI securities account (demat and online share trading account). But as this account is held by limited Indians, its of not much help.

CAMS service for online NPS payment has not started yet and page on their site shows under construction.For Govt Employees:

All new government employees (central and state) will no longer have GPF accounts and NPS account will be mandatory for them. So all who have joined government services after 1st Jan, 2004, will have NPS account.
NPS will work on defined contribution basis and will have two parts – Part I and Part II.

Tier IMandatory non-with-drawable Pension Account – Monthly contribution will be 10 percent of basic salary and equal amount will be deposited by Govt. This amount will be kept in a non withdrawal Pension Tier I account.
Tier IIVoluntary with-drawable Savings Account – It will be voluntary tier-II with-drawable account from which individual can withdraw money anytime without giving reason. There will not be any contribution from Govt. side in this account.

Govt Employee can exit after age of 60 years from Tier I Scheme and it will be mandatory for him to invest 40% of pension amount to purchase an annuity through a Life Insurance Company, It will provide pension for the life time. In case of employee wants to leave NPS before age of 60, the mandatory annuity will be 80 per cent of the pension amount.

Charges:

For account opening and issuance of PRAN : 50 Rupees
Annual maintenance charge: 350 280 Rupees per year
Initial subscriber registration charge: 100 Rupees
Transaction charges and contribution upload– 0.25% of the amount, subscribed by the NPS subscriber, subject to minimum of Rs.20 and a maximum of Rs. 25000.
Fund management charge: 0.0009% per year on the fund value.
Fund switch charges: 20 Rupees.
Any other transaction not involving a contribution from subscriber – Rs 20

As of now, this charge appears to be high. Considering 12 transaction a year (one every month), investor has to pay 470 Rs a year. That’s on higher side. These charges will reduce in coming years, as number of subscriber increases.
PFRDA may ask Government to partly pay the maintenance cost to reduce overall cost for investor.

Income tax treatment:

The bad part about NPS is that the returns will be fully taxable not like EPF and PPF. It will come under exempt-exempt-taxed (EET) regime, the amount would be taxed at the time of withdrawal. NPS will not attract any Security Transaction Tax (STT) and Dividend Distribution Tax (DDT).
However PFRDA has suggested government to exempt scheme from tax, but that decision will only be taken by new government.

Update: As per new notification by Finance ministry, under Direct Tax Code (DTC), NPS will also come under EEE and withdrawal will also be non-taxable from 2011. So national pension system could become the best long-term savings option.

From April 1, 2011. Employer contribution from employer towards NPS will not be included in the Section 80 C deductions (Like what happens in case EPF currently). So if employer contributes 50,000 to your account and you contributes same amount, Your 50000 will be available for exemption under 80-C and there won’t be any income tax on rest 50,000 deposited by employer. This increasing your overall deduction claim.

Where to apply for NPS

NPS is available at selected Service Provider (SP) branches of various Point(s) of Presence, Click on link for each POP for branches address. You may also view list by state-city on this link: POP/POP-SP location details.

For more information, application form & offer document, walk into your nearest Service Provider branch of the above-mentioned Point(s) of Presence.

Application Forms

  1.   NPS (New Pension Scheme/System) - Application Form (456.0 KiB, 14,001 hits)

  2.   New Pension Scheme/System (NPS) - Offer Document (2.9 MiB, 10,458 hits)

  3.   New Pension System (NPS) - Welcome Kit (1.2 MiB, 5,531 hits)

  4.   NPS (New Pension Scheme) - Investment Guidelines (73.8 KiB, 7,100 hits)

  5.   New Pension System (NPS) Contribution Instruction Slip (NCIS) (15.1 KiB, 5,205 hits)

  6.   NPS Scheme Preference Change/Switch form (26.9 KiB, 1,127 hits)

  7.   Swavalamban Yojana Declaration Form (139.7 KiB, 1,315 hits)

  8.   Subscriber request form to change Point of Presence (POP) (63.3 KiB, 1,049 hits)

  9.   Subscriber request form to change POP-SP (16.4 KiB, 986 hits)

  10.   UOS-S12 Withdrawal form for Tier II account under NPS (47.0 KiB, 990 hits)

  11.   Request form for change in signature and/or change in photograph (12.8 KiB, 849 hits)

  12.   Request For Change/Correction in Subscriber Master details And/Or Reissue of I-Pin/T-Pin/PRAN Card (402.9 KiB, 1,192 hits)

  13.   Request for Activation of Tier-II account under New Pension System (NPS) (215.3 KiB, 1,160 hits)

  14.   S1 - Subscriber Registration form to get PRAN (61.3 KiB, 1,313 hits)

Launch Notification:

national pension system NPS


734 Responses

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  1. MOHIT KUMAR says

    SIR WHAT IS THE METHOD OF CRA FOR TRACING OUR DETAILS WHEN I APPLIED FOR NEW PRAN NO. ( IN CASE WE HAVE ALREADY HAVE AN PRAN NO.) DUE TO SOME PROBLEM WITH OLD EMPLOYER. I OPENED NEW PRAN CARD . PLEASE GUIDE US

    • Pankaj Batra says

      @Mohit
      They may track it using PAN card/Aadhar card details, if same has been provided in NPS account.

  2. S Das says

    I went to all the banks. But no bank is ready to open any NPS account. They even know the NPS full form. They suggested rediculas menthods. etc.
    Thanks

  3. kulbeer singh says

    Sir hum apna transaction details fund value apne email add par chahte hain.

  4. NIYAZ AHMED KHAN says

    dear sir, I have made nps contribution to Tire -II via net banking with SBI on Monday 19th may2015. till Friday it was not getting reflected in my NPS Account. please advice how does it takes or really it works

    • Pankaj Batra says

      @Niyaz
      It takes 4-5 days to show for online contributions.

      • niyaz ahmed khan says

        thanks a lot. it was reflected 04 to 05 days.

  5. Maruti Chougule says

    Sir, I went through most of the posts and found my queries answered. Thanks a lot!

  6. ranjan says

    excellent work done by Mr. Batra,so many doubts has been cleared by going through the comments section. thanks a lot.

  7. shiv says

    sir Mai abhi state government me job kar rah hu.abhi mera selection railway me ho gya hai aur mai kuch problem ki Vajah se first employer ko bina bataye resign dena chahta hu mai janna chahta hu ki Kay mai another pran a/c khulwa sakta hu.pehle a/c ka balance na mile to bhi chalega.plz plz reply me Sir plz.

    • Pankaj Batra says

      @Shiv
      PRAN is linked to PAN card and department may not issue new PRAN if you apply with same PAN information.
      You can try if you can get one, else you would need to provide existing PRAN to new employer.

      • arun says

        sir your earlier comments in page No. 14 with Mr kanhu you have told that if
        anybody don’t want any balance amount from his previous PRAN account,then if require he can open new pran.and is it possible that somebody have issued with two pran and some body is denied the same for having a PRAN A/C. why CRA/NSDL is doing such thing with its subscriber,when rule should be same for everybody.after all it is a question of some bodies carrer.plz reply

        • Pankaj Batra says

          @Arun
          As per rules, one person may have one NPS account only.
          Earlier it was nor enforced properly, but now if NPS department checks on basis of PAN/Aadhar then they may be denied to open new account.

  8. dipankar das says

    i want to buy nps of my area.plz send add where nps is start . KHARAGPUR ,WEST BENGAL

    • Pankaj Batra says

      @Dipankar
      You can visit following bank branches:
      ICICI BANK, Gitanjali, Malancha Rd Kharagpur, Paschim Medinipur 2582231, Kharagpur, West Bengal – 721304, Phone: 03222252009
      IDBI Bank, Ground Floor, Mallancha Road, Near UTI, PO – Nimpura,Town/PS, Kharagpur, West Bengal – 721304, Phone: 03222254724, Alternate Phone: 0322321000

  9. shiv says

    sir I have read all comments given here. in many comments I read that one can get a new pran no. is it possible? and if yes then on what conditions?if no then what should I do if I have not given technical resignation in prev job and joined new job.plz clarify it p2p.thanks.

    • Pankaj Batra says

      @Shiv
      As such, a person should not have more than one NPS account (or PRAN).
      But There is no strict enforcement from CRA as of now and one can get more than one PRAN.

  10. dipankar das says

    i want to by NPS.plz tall me add where Nps buy.near kharagpu,balichak,west bengal.pevious phone no. is wrong.

    • Pankaj Batra says

      @Dipankar
      ICICI BANK LTD Gitanjali, Malancha Rd, Kharagpur, Paschim Medinipur 2582231, Kharagpur, West Bengal – 721304. Phone: 03222252009
      IDBI Bank Limited, Ground Floor,, Mallancha Road, Near UTI, PO – Nimpura,Town/PS, Kharagpur, West Bengal – 721304, Phone: 03222254724, Alternate Phone: 0322321000

  11. Nadir husain ansari says

    sir mere pran account me nominee ka nam nahi hai please nominee ka nam add karne ki kripa kare nominee ka nam hai smt.Fatma begum w/o mr.nadir husain ansari

  12. Amit says

    Sir
    i didn’t received pran kit and in sms it only shows last four digits of my pran no.
    At the time of pran ac.opening i was with different employer.so,how could i get my full pran ac.no.

  13. Pinku says

    sir,
    What is the procedure for final withdrawal from nps in case a person resign after 8 yrs continuous service and which forms are required to submit for same.

    • Pankaj Batra says

      @Pinku
      There is no way to withdraw full amount before 60 years, as per current rules.

  14. Ambar kachhap says

    sir i am having 2 PRAN accounts.earlier i worked in sbi so over there i had opened an account.after that i resigned sbi and joined canara bank.now i have to close my earlier Pran account.and whataever amount i have in my earlier account to be ttransferred to my new Pran account no.please guide me the procedure.i am in canara bank posted in tamilnadu and my head office is banglore.

    • Pankaj Batra says

      @Ambar
      As of now there is no option to close account before 60 years of age, or transfer to another account.
      One person should only have one account ideally and you should have quoted existing account with new employer.

      • ambar kachhap says

        Yes sir i understand but now its too late for me.what can i do in this situation when i have 2pran ac.in march 31 ittself my earlier pran ac was freezed as no transaction. was made within a year.i faced a lot of problem for activation of the pran ac. i talked to mumbai main branch nps section they told me to send a letter to your head office along with hard copies of ur pran ac.they will take care of it.

        • Pankaj Batra says

          @Ambar
          Yes, now only option would be to request NPS office for manual merger of accounts, if possible.

          • ambar kachhap says

            ok thank you very much sir,i will talk to the concerned person and i will be in touch with you.

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