in Finance, India, Investment

National Pension System (NPS)

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, 18,426 hits)

  2.   New Pension Scheme/System (NPS) - Offer Document (2.9 MiB, 13,204 hits)

  3.   New Pension System (NPS) - Welcome Kit (1.2 MiB, 8,476 hits)

  4.   NPS (New Pension Scheme) - Investment Guidelines (73.8 KiB, 9,860 hits)

  5.   New Pension System (NPS) Contribution Instruction Slip (NCIS) (15.1 KiB, 7,840 hits)

  6.   NPS Scheme Preference Change/Switch form (26.9 KiB, 2,568 hits)

  7.   Swavalamban Yojana Declaration Form (139.7 KiB, 2,881 hits)

  8.   Subscriber request form to change Point of Presence (POP) (63.3 KiB, 2,692 hits)

  9.   Subscriber request form to change POP-SP (16.4 KiB, 2,614 hits)

  10.   UOS-S12 Withdrawal form for Tier II account under NPS (47.0 KiB, 2,469 hits)

  11.   Request form for change in signature and/or change in photograph (12.8 KiB, 2,367 hits)

  12.   Request For Change/Correction in Subscriber Master details And/Or Reissue of I-Pin/T-Pin/PRAN Card (402.9 KiB, 2,670 hits)

  13.   Request for Activation of Tier-II account under New Pension System (NPS) (215.3 KiB, 3,070 hits)

  14.   S1 - Subscriber Registration form to get PRAN (61.3 KiB, 2,854 hits)

Launch Notification:

national pension system NPS

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793 Comments

  1. dear sir .. please help me out. I am working in govt insurance sector and having nps account here. Now i have been selected in nationalised bank but problem is that i have applied as an fresh candidate in the bank hiding about my employment status in insurance . how can i close my present nps account so that i can open a new nps account in bank job

    • @Ankita
      If you want to Exit from earlier NPS account Before the age of Normal Superannuation (60 years), At least 80% of the accumulated pension wealth of the subscriber should be utilized for purchase of an annuity providing the monthly pension of the subscriber and the balance is paid as a lump sum to the subscriber.

  2. Hi Pankaj,

    I am a central government employee…. Newly recruited in June…. However due to administrative delays my salary started from the November onwards…. However in-between my Pran number generation and my salary procedure completion I transferred my bank account number which I mentioned in my Pran form….. I have two queries

    1) will change in ifsc code as the account number was transferred to another Sbi bank, would lead to stopping of NaV’s ? Or will it lead to stopping of my salary or lead to more administrative complications ?

    2) my posting is in border area and my cra nodal office is in Delhi? Can I get my personal details changed by a near by pop-sp?

  3. dear sir, i have a query.. earlier i worked in post office so i had a PRAN Acc. but now i am about to join state bank of patiala… so i want to know as during my post office service mere PRAN acc. mai jita 10% salary s ktta tha utta contribution post office krta tha… toh ky bank b contribute krta h 10% of salary ya bank sirf hmare 10% ko e rakhta h

  4. 1.I (shubham 20 years) have my NPS account open in Bank of Baroda but i have to convert it ino APY. My saving account is in Bank of India. From where I have to convert at BOB or at BOI ?

    2. my father is above 40 years I want to know how to check bal in NPS account and didn’t have login I’d only pran card. please reply the above 2 question

  5. I want to open a new NPS account. Is there any benefit in joining to enps of NSDL vs. applying through ICICI bank like applying to mutual funds online are cheaper compared to applying through any POP, please advise.

  6. Sir
    I have been working in a got. organisation since 2 years and have not yet opened my NPS account.
    If I open it now,maximum how much can be deducted per month?
    Can I get the entire contribution of one year deducted in one go?

  7. my local area, there are no such bank as you provide. i have bank account in Aramboly branch Kanyakumari District , south Tamilnadu ,There any local bank where i opening my pran.

  8. Sir,
    I’m working in southern railway trichy .i would like to know my new pension monthly credit amount as well as balance amount through sms.For this need. What can do.also i have pran card how can i check please to reply.

  9. Sir,
    I am a Government Employee since 1998 and I am governed by General Provident Fund. Besides this, I am also having a PPF account. I know that investing in NPS Tier II (upto Rs.50,000/-) would help me to have further tax savings. But before doing that, I was wondering whether I should really go for NPS-II since I am already having (1) GPF, and (2) PPF? Should I really go for it just for the sake of availing Tax Benefit upto Rs.50,000? Shall it really be a profitable one in my case in the long run ?
    Thanks
    Pradipto

  10. Sir,
    On DEC.2015 I am entered in atal pension yojona , for getting rs. 5000/- pension, Now I am not income tax payer . in future If I may pay income tax my pession account is dismissed .please reply.

  11. Sir facing same problem of Ankita. If I close my present pran, can I open new pran. I had spoken to cra nsdl, reply was that if one pran is closed, second pran can’t be opened. If yes, how to close present pran

  12. M Delhi govt m (state govt) m working Tha par ab mera selection MCD m ho gya h aur Maine MCD office m likh k diya ke mere pran Delhi govt wale pran number m meri deduction ki jye toh unhone kaha ki ap form bharo tb hoga woh bhi NPS Delhi k office m please mjhe btye ki mjhe konsa form bharna h aur nps ka office Delhi m kaha h

  13. I opened Nps Tier 1 a/c in Aug 2012 while working in a corporate sector.In July 2015 I resigned from job.now I m not doing job anywhere. So I want to transfer my PRAN from corporate to all India citizen and also want to change my bank detail.
    By the help of NPS call center executive I knew that I should submit a Form ISS-1 and Form UOS-S2 through POP-SP.
    Then I was contact to POP-SP Location.but they told that they are not doing any procedure related NPS transfer.
    Pls tell m.1)what I have to do?
    2) can I submit formyself to the PFRDA? If yes, to whom /where does it go?