It is a pension scheme introduced by Govt. of India where, you can regularly invest in this scheme and get a part in lump-sum at your retirement and it gives fixed monthly income for the lifetime.
Common man's gateway to getting pension benefits post retirement.
Bajaj Capital as POP
How does it work?
The NPS is based on a unique individual Permanent Retirement Account Number (PRAN) created for individual subscribers.
The PRAN Number will remain the same for your lifetime irrespective of where you operate your NPS A/c from across the nation.
This system will initially be based on two types of sub accounts created for individual investors:
Tier 1: non with draw able & tax deferred pension account ( for all individuals) and
Tier 2: with draw able savings account with no tax advantages (for all individuals subject to minimum deposits per year in Tier-1 A/c).
In this system,
A member will have complete control on how his / her contributions / savings are being managed by selecting a professional pension fund manager (PFM) from a pool of PFM's
A subscriber shall periodically contribute savings into his/her Permanent Retirement Account (PRA) while he/she is working and
i. Use the accumulations at retirement to procure a pension for the rest of his/her life.
What are the exclusive NPS Benefits?
Cost effective mode of planning for one's retirement, the cost structure is far more efficient when compared with charges levied by mutual funds or other investment options.
Investment in NPS is highly safe and it contains very less amount of risk – these schemes were launched in May'09 and have yielded about 12% annualized return.
New Pension Scheme provides high returns compare to other relative investment options.
It provides tax benefits under section 80C of income tax.
Government provided pension plan directly regulated by PFRDA - Safety wise
Great End to End Retirement Planning Tool as it will offer investmenty benefit during the work life and annuit benefit post retirement
Option to seamlessly switch across savings b/w investment schemes
Nationwide access to NPS over a period of time
A Must in every individual's portfolio
Investment Options in NPS
NPS offers two approaches for investment:
- (a) Active Choice – the subscriber will have the option to select how his / her proceeds will be invested across the 3 asset classes with a cap on equity at 50%.
- (b) Auto Choice – If the subscriber is unwilling to express choice, the proceeds will be invested in a pre determined asset allocation depending on age band that the subscriber is in
Investor can decide on proportion of investment to be made across different Debt, Equity & Government Securities. The maximum exposure that can be taken in equity is up to 50%. The investment classes are as given below:
- (a) G Class: Investment would be in Government securities like GOI bonds and State Govt. bonds
- (b) C Class: Investment would be in fixed income securities other than Government Securities
- (c) E Class: Investment would primarily in Equity market instruments. It would invest in Index funds that replicate the portfolio of either BSE Sensitive index or NSE Nifty 50 index.
As per Pension Fund Regulatory & Development Authority (PFRDA) Exit Rules, following Withdrawal categories are allowed:
a) Upon Normal Superannuation - At least 40% of the accumulated pension wealth of the subscriber has to be utilized for purchase of annuity providing for monthly pension of the subscriber and the balance is paid as lump sum to the subscriber.
In case the total corpus in the account is less than Rs. 2 Lakhs as on the Date of attaining the age of 60 (Non-Government sector), the subscriber (other than Swavalamban subscribers) can avail the option of complete Withdrawal.
b) Upon Death - The entire accumulated pension wealth (100%) would be paid to the nominee/legal heir of the subscriber and there would not be any purchase of annuity/monthly pension.
c) Exit from NPS Before the age of Normal Superannuation – 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.
d) Premature Withdrawal - Option to withdraw up to 25% of the contributions made, on completion of 10 years of service. The withdrawal can be done in few cases e.g. Marriage, Children Education, Medical Emergency Building/ Purchase of home etc.
The withdrawal can be done 3 times during the lifetime provided there is a minimum gap of 5 years between each withdrawal.
Do I have a choice to select my Fund Manager for investing my proceeds?
- Tier I:
- (a) Minimum contribution: Rs.1000 in a year
- (b) Minimum contribution: Rs.500 per contribution
- Tier II:
- - Minimum contribution of Rs.1000 at the time of account opening<
New Account Opening Charges (Both Tier I & Tier II): Rs.100
Subsequent Contribution / Modification: 0.25% of the amount subscribed by the
subscriber,subject to minimum of Rs.20/-
Two copies of identity proof
Two copies of address proof
Signature / Thumb impression (Male: Left, Female: Right)
Date of Birth Proof
Self Declaration that he / she is not a pre existing member of NPS
Colored Passport size photograph
For Tier II Account, along with above documents, bank details & cancelled cheque is mandatory. NRI should have account with bank based in India to open account under NPS.
After the account is opened, the Central Record Keeping Agency (CRA) shall mail a welcome kit containing subscriber's Permanent Retirement Account Number (PRAN) card and the complete information provided by the subscriber in the Subscriber Registration Form.