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)
This is a factual account. Every date and quote below is from written correspondence I…
Every year around July–August, the same ritual: open the Income Tax Department's offline ITR utility…
In my previous update on cross-border investing, I broke down how I secured a zero…
In my last finance update, I documented the exact timeline of executing my very first…
Introduction: Most bank customers accept a credit card rejection as "final." But what happens when…
After spending quite a few days researching platforms and figuring out the best way to…
View Comments
about NPS detail knows very fine, i am state PSU employee & for our pention scheme some amount diduct from my salary, can i swich to new NPS? or opening new additional A/C ? pl. guide me so i can invest in nps as my option(equity/bond /any option.
@Vishnu
If you already have NPS account with PRAN card, you can invest yourself into NPS by picking equity/debt and bond ratio by quoting existing PRAN.
In case you don't have, you can have one opened in bank or post office.
Dear sir,
I am Dr.H.Gowda working as a Assistant Professor at Rani Channamma University, Belagaum, Karnataka, recently i joined this post, earlier i was worked as a Lecturer in Karnataka State Govt. Pre-University college, at Hassan(Karnataka) from past 3 years, so the problem is when i was there at the time i contributed Rs.2250 per month from my salary and also govt. contributed same amount to my account. So in the present working place they were having separate CPF, they informed me it is not possible to add the NPS to CPF, so what can i do sir, can i withdraw earlier NPS or any suggestion is there please help me to take a decision.
Thank you sir
@Huche Gowda
A government employee mandatorily covered under NPS cannot exit from NPS till he resigns or retires from the service. In case of resignation, at least 80% of the pension wealth to purchase a life annuity from any IRDA - regulated life insurance company. Remaining 20% of the pension wealth may be withdrawn as a lump sum.
hi I am debojyoti, I want to know that can i increase my contribution any time in NPS account.
@Debojyoti
You can contribute to your NPS account anytime and can also increase your contribution.
iam intrest on this any can have full detail please update me
@Shivu
This post has most of the information about NPS.
Please let us know what more you want to know about NPS.
I was working with an employer (a State Government Undertaking) with CPF option. Now I have Joined GoI organization under NPS. Now how can I transfer my CPF amount from old employer to new employer.
If not possible, can I withdraw my whole amount from prev employer and invest in some scheme. Will the withdrawl amount attract I-Tax. I have served prev employer for more than 24 years.
@Ravindra
As new employer does not have CPF option you cannot transfer amount from old CPF to new employer account.
As of now transfer from EPF/CPF is not possible to NPS account.
Best would be to withdraw amount from old CPF account and invest into some good scheme with similar returns (PPF etc). There would not be any income tax on withdrawal amount as your account has been held for more than five years.
Hi,
Two Questions:
1) In case of EPF with Pvt Sector Employer (E2) was held for slightly less than 5 yrs, e.g. 4 yrs 10 months, is it possible to xfer it to Post Office PPF A/c without incurring withholding of income tax etc.
2) An even prior Pvt employer (say E1) had transferred my EPF amount to EPFO, Bangalore, but they are not able to find details for my account number given to me by E1; hence unable to xfer that from E1 to E2. What is the probability that EPFO is in error; or am I forgetting something. If I remember, E1 had given option to withdraw or xfer to EPFO, and I had probably selected EPFO.
Regards,
S. J.
@Sushik
1. Transferring EPF amount to PPF does not make it non taxable.
2. You may use this issue of transfer failure for non deduction of taxes. If employment with E1+E2 is more than five years and you initiated EPF transfer which was not done because of issues out of your control, you may not pay taxes on EPF withdrawal. But beware if income tax department send you notice, you would need to handle them by replying appropriately.
what to to in case to wrong online payment to nps contribution??
@Praveen
Can you explain in details what went wrong in online payment for NPS contribution.
i am a NPS subscriber PRAN number 110050890815 had received an email on 4th feb 2012 from communications@nsdl.com regarding non payment of the contribution. in the same mail my PRAN number was stated as 110080881599. i have done the payment of rs 12000 through SBI internet banking and i have done the payment in PRAN number 110080881599.
After the payment i realised that the PRAN number is wrong and the payment might have gone to the wrong account. kindly help me with the above matter.
@Praveen
You should contact your POP for same. Give a written letter explaining the issue.
If it does not help, you may call CRA on 1800222080 and ask for their help.
sir,I m staying in shillong state meghalaya and interested in NPS. I inquire two bank, SBI and Axis but non can give any detais about this, so pl.help me for opening the account.
@Debojyoti
This page has all bank details and their contact numbers: http://www.pankajbatra.com/india/new-pension-scheme-nps-india/
You may call them and ask about same.
Also, you may find nearest POP location from this page: https://www.npscra.nsdl.co.in/pop-sp.php by selecting State and city.
Sir,
i am 31 years old and will retire at 60. now i am working at Kerala State Electricity Board and most probably the board will be converted as a Govt owned company. I wish to join NPS tier 2 scheme.
1. Would i get the Govt contribution even after the board became company and if it is privatised in a remote future?
2. How much should i contribute to get Rs. 8000/- per month ( at todays rate) on my retire at 60 years
@Balu
If you have NPS tier 1 account, you can also get Tier 2 account opened.
1. You may not get Govt contribution when company is privatized, but employer contribution would continue.
2. NPS does not guarantee a fixed monthly pension amount. Its market linked like mutual funds and return would vary based upon your portfolio of equity, debt and bonds.
I there any provision to transfer contribution of existing PF to NPS...
@Hirak
As of now there is no such provision for transfer of amount from PF to NPS.
What happens to a private sector employee's NPS amount in case he resigns from one company & joins another Company both of which allow NPS contributions. Is his PRAN no recreated in the new company and the old amount needs to be transferred(like in EPF)? Or can he continue using the same PRAN no & the new company contributes to that PRAN account?
@Maitreyee
NPS accounts are centrally managed by PFRDA and does not require transfer in case of job change.
You should quote existing PRAN and NPS account details to new employer so that contributions in same account can be made in future.