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.
Any Indian citizen will be able to start a National Pension System account and can start investing any amount up for a pension.
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 Limited, IDFC Pension Fund Management Company Limited, Kotak Mahindra Pension Fund Limited, Reliance Capital Pension Fund Limited, UTI 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.
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.
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 I – Mandatory 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 II – Voluntary 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.
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.
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.
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.
NPS (New Pension Scheme/System) - Application Form (456.0 KiB, 19,346 hits)
New Pension Scheme/System (NPS) - Offer Document (2.9 MiB, 14,183 hits)
New Pension System (NPS) - Welcome Kit (1.2 MiB, 9,388 hits)
NPS (New Pension Scheme) - Investment Guidelines (73.8 KiB, 10,652 hits)
New Pension System (NPS) Contribution Instruction Slip (NCIS) (15.1 KiB, 8,649 hits)
NPS Scheme Preference Change/Switch form (26.9 KiB, 3,485 hits)
Swavalamban Yojana Declaration Form (139.7 KiB, 3,662 hits)
Subscriber request form to change Point of Presence (POP) (63.3 KiB, 3,443 hits)
Subscriber request form to change POP-SP (16.4 KiB, 3,696 hits)
UOS-S12 Withdrawal form for Tier II account under NPS (47.0 KiB, 3,312 hits)
Request form for change in signature and/or change in photograph (12.8 KiB, 3,059 hits)
Request for Activation of Tier-II account under New Pension System (NPS) (215.3 KiB, 3,866 hits)
S1 - Subscriber Registration form to get PRAN (61.3 KiB, 3,621 hits)
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View Comments
sir, i am working abu dhabi. i investment yearly 50000RS.NPS system.now may age48 .so ipay 13year.after how much i can get.i am NRI.this god for or not pls give me sagtion.
@Shantilal
The return under NPS is market driven. Hence, there is no guaranteed/defined amount of return.
It would depend on your ratio of investment in equity, debt and bonds, fund manager chosen and market performance.
sir i had contact to the aggregator for nps lite. as in this scheme according to pfrda one can open a account by regestring Rs100.but the aggregator had asked me Rs1000 at the time of registration.is it right.but in in pfrda website (manual of swavalamban it is Rs100).can u clear.tnx
@Vikash
You must tell aggregator that you want only NPS lite account. They may be opening normal NPS account for you sometimes.
sir i am 42 years old.if i invest Rs 10000 annualy in NPS. when il be 60, how much pension or return il get. is this scheme better for me. kindly suggest any other besides this.
Hi Tarun,..
As stated by Pankaj & known to all of us. Return in NPS is Mkt driven & hence no assurance. You can seek comfort if your employer is contributing upto Rs 1L in NPS from your salary, will give you Income Tax benefit applicable to your IT slab us 80CCD(2). If your risk appetite is low & you are looking for assured returns, then use PPF where current return is 8.6% with Sec 80C benefit.
sir i open a nps account on 28/4/2012 through SBI shillong branch, but till date I didnot receive any material.how can i know the status of my application.
Write to grcpfrda@gmail.com giving details of your application etc. Quote your appl Ack no, PAN no & Full Name. Please provide the acknowledgement number of your application and contribution remitted with your PoP-SP;
Address to
Mr Kamal Kumar Chaudhry, Chief General Manager
PENSION FUND REGULATORY AND DEVELOPMENT AUTHORITY
FIRST FLOOR, ICADR BUILDING, PLOT NO. 6,
VASANT KUNJ INSTITUTIONAL AREA,
PHASE - II, NEW DELHI - 110070
OFFICE TELEPHONE & FAX NO.:- Tel- 91-11-26897948/49 Fax- 91-11-26897938
Dear Pankaj,
I have opened my account in October, 2011 and when you deposit cheque with your bank then bank will debit the amount from your account within a week and the credit in PRAN Account will reflect in 10-15 days time i.e., from the date of deposit of cheque to credit the total time it takes 20-25 days.
@Phani
Pl chk your PRAn acct stt.
I had deposited online with SBI giving my PRAN no. The amount was credited to my PRAn no within 2 days.
I can invest upto 5L per year for next 5 years, what retirement plan do you suggest to maximize annual payback. I need not have returns for first 5 yrs, my age 58 yrs.
Can you please suggest 2 options.
Thanks and regards,
@Hari
As you are 58, NPS is not suitable for you. NPS is good for those who have more time left & maturity is at 58-60Yrs.
1. Option A: Invest in Recurring deposit which will give you safe & assured returns. Open a 2Yr RD to start with. Once you turn 60, open another RD which will give you Sr citizn rate
2. Optio2 : Invest 30% in Equity MF & 70% in Debt funds.
I lost my I-pin And also T-pin code, I apply for that in USO-S2 forms. How many days I will get it.
@Abhijit
It may take 15-20 days in receiving new passwords.
hi pankaj, what u suggest choice of seven fund manager
Sachin - In current Mkt scenario, Debt & Bonds are safe bet than equity. So your choice of allocation is more important than Fund Mgr. I did a tabulation of Last 1 Yr return of 6 PFMs & found ICICI to be most effective. However past perf may not be true in coming yrs. So you need to allocate & observe your T-I acct perf over a year before deciding on change of PFM
Hi Pankaj. I am 24 years guy and I joined in a Central Govt organization recently. I have a valid Tier-I account in NPS. I want to start Tier-II account. I am confused to select which PFM in the six PFM's. Can you suggest me which is the best one.
Apart that, I want to know how can we withdraw money in our Tier-II account. What is the procedure for that. Whether the amount can be withdrawl using our Bank ATM or what exactly the procedure to with draw the amount in Tier-II account.
Varun - you dont get any IT benefit in Tier-II acct. So pl use Tier-II only after you exhaust your 80C ceiling of Rs 1L. ALso, MFs & Equity investment will give you better returns than T-II acct.
@Varun
Adding to reply posted by Mr. Sanjay:
In order to withdraw from Tier II account, the subscriber needs to submit a duly filled UOS-S12 form to the associated POP-SP. If the request is entered and authorised in CRA system by the POP/POPSP before 1.30 PM, then it goes for same day's processing, or else it goes for the next business day. The redemption amount may vary due to the variation of NAV. Units are redeemed based on the NAV declared at the end of the processing day. On T+3 days, (T being the date of processing) the funds are transferred from the Trustee Bank to subscriber's bank account as registered in the CRA system.
Dear Mr.Pankaj,
I resigned from a private company and am entitled for pension as I have completed more than 12 years of service. I have been asked by my ex-employer to open a separate account (PENSION ACCOUNT) exclusively for receiving pension either with SBI or PNB. The bankers say, it is not mandatory to open a separate account for pension instead I can receive the same in the existing savings account.
Please clarify.
Thanks
N.Hariharan
@N.Hariharan - Banker is correct. When you fillup your pension form, you can give details of any existing account. It neednot be with SBI or PNB. Any Nationalised or Pvt sector bank will do. My pension acct is with HDFC Bank & I get my pension through LIC to my credit wout any issues. Sometimes employer have their employee Salary acct with particular banks & hence try to coerce employees to open accts with those banks. Bank agents also have targets & they try to take advantage of people like you to meet their targets. So go ahead & give your existing acct nos. Also if you read the Terms & conditions of pension form, you will see that no such restriction/new acct reqt exists...If they still insist, make a complaint to PFRDA.
While thanking you for your clarification I feel the reason for insisting on opening a separate account could also be just to make sure that the account is not a joint account.
You are wrong. You can link a joint accct to your NPS. It is good also. In case of any unfortunate event, your family can continue to get the pension provided they are the noninee in your nPS acct. Eitherway, there is nothing stopping you from connecting a joint acct to NPS...
Thanks Sanjay for clarifying the matter.