• NPS - National Pension Scheme

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    About National Pension Scheme (NPS)

    The National Pension Scheme (NPS) is a contribution scheme launched by the Indian government, which offers a large variety of investment options to employees. The scheme helps individuals make decisions with regards to where they should invest their pension wealth. The National Pension Scheme’s main objective is to lower the liabilities of the Government of India with regards to total pension as well as to ensure that the country’s citizens would earn a stable income following their retirement along with helping them earn decent returns on their investment.

    The NPS was launched on the 1st of January 2004 and was aimed at individuals newly employed with the central government, but not including ones in the armed forces. From the year 2009 however, the NPS was made open to every Indian citizen between the age of 18 and 60.

    Unique Permanent Retirement Account Numbers (PRAN) are allocated to each subscriber under the NPS Scheme at the time of their joining. Subscribers are also allocated two accounts, which they can access at any time.

    NPS

    Types of NPS Accounts

    NPS subscribers are issued with a Permanent Retirement Account Number (PRAN), which remains unchanged throughout the length of the scheme. NPS accounts are structured as Tier 1 NPS and Tier 2 based on the withdrawal norms.

    • NPS- Tier 1 Account

    It is the basic NPS account which does not allow premature withdrawals unless the member has completed 15 term years. These withdrawals are repayable advances and are allowed only in case of an emergency. However, Tier 1 account holders are eligible for partial withdrawals on of 25 years. Tier 1 accounts of government employees are subjected to investments in government and corporate bonds, while that of other citizens are invested in fixed deposits and liquid funds as well.

    • NPS- Tier 2 Account

    Tier 2 NPS accounts were launched by the government in the year 2009 and it offers greater flexibility than Tier 1 accounts. Here the account holders can withdraw their amount without any withdrawal charges or penalty. Tier 2 offers the investor an option to invest either in government bonds, fixed income instruments, or equity funds. It also allows transfer of money to Tier 1 accounts. Unlike Tier 1 accounts, NPS Tier 2 accounts does not have locking periods and are not exempted from tax under section 80 C of Income Tax Act.

    • Swavalamban Yojna Account

    Swavalamban Yojna was a financial inclusion scheme for the economically backward sections of the society. It was applicable to all employees in the unorganized sector of employment. For Swavalamban accounts, government made contributions of Rs.1000 for the first four years after enrollment. Swavalamban Yojna is replaced by Atal Pension Yojna.

    How the new pension scheme compares to the National Pension Scheme

    The main features differentiating the two schemes are:

    Features National Pension Scheme New Pension Scheme
    Contribution by employees An individual has to contribute 10% of the total of his Special Pay, Basic Pay and all other allowances that combine to make up his Provident Fund. New Pension Scheme, all of the those are included along with Dearness Allowance
    Contribution by the bank The bank’s contribution will match the contribution of the employee, under the national pension scheme a separate account was created to collect the funds. The new pension scheme, the combination of the contributions of both parties will be kept in one account.
    Employee’s Additional Contribution Contributions made under the National pension scheme could be stopped by employees by providing a notification one month in advance. The new pension scheme allows for withdrawals as well as contributions at any given time.
    Management of Funds Managed by a P.F trust PFRDA appoints six fund managers to manage the subscriber’s investments.
    Scope of Regulation No such body exists at the nationwide level. The authorised regulatory body for the New Pension Scheme is the PFRDA.
    Levy of Charges No extra charges or fees were levied on subscribers. Some fixed as well as variable charges may be levied under the New Pension Scheme.

    Features of NPS

    The salient features of the National Pension Scheme are:

    • The NPS is eligible for all Indian citizens between the ages of 18 to 65. And Subscribers are required to make a minimum contribution of Rs. 500 at the time of opening the account.
    • The National Pension Scheme offers transparency to the subscriber and is a low cost investment option. Subscribers have the advantage of choosing their own pension fund schemes where they will be aware of how the investment is doing on a routine basis.
    • The account matures when the subscriber reaches retirement.
    • 60% of the corpus can with withdrawn on maturity and the remaining 40% is used to purchase annuities.
    • Contributions made to the NPS are eligible for tax deductions under section 80C of the Income Tax Act.
    • The NPS application process is extremely simple since the subscriber only has to open up an account at the respective nodal office and acquire a PRAN
    • Since employees are allocated unique PRANs, they will be identified by the same PRAN all over the country, regardless of which part of India they are in.
    • Subscribers can access details pertaining to the NPS online
    • The NPS offers its subscribers a wide range of options to choose from, which include Pension Fund Managers, Funds to allocate their money to and Customer services providers among others.
    • The NPS also give subscribers the flexibility to switch between fund managers and investment options
    • Should the subscriber choose, he or she can change the contribution amount as well as the contribution frequency at will
    • The NPS is a low cost investment option with extremely low fund management charges

    While premature withdrawal from the NPS is not permitted, there are some circumstances where it can be availed. The rules for withdrawal differ based on the type of NPS account the subscriber holds.

    Tier I accounts: Tier I accounts are mandatory for all subscribers to the NPS. These accounts have certain restrictions with regard to withdrawal of funds. Funds from a Tier I account cannot be withdrawn until the subscriber reaches retirement.

    Tier II accounts: Tier II, on the other hand, is a voluntary account. Additionally, a Tier II account functions similar to a savings account and the subscriber is allowed to make withdrawals as per their discretion.

    The PFRDA allows for partial withdrawal of funds under the following circumstances:

    • Partial withdrawal of funds is only permitted to subscribers who have been contributing a percentage of their income towards the scheme for at least 3 consecutive years.
    • Partial withdrawal is only permitted in cases of serious illnesses, higher education or marriage of the subscriber’s child and for the purchase of a place of residence.
    • The PFRDA also provides a list of serious illnesses where partial withdrawal of NPS funds would be permitted. These medical conditions include kidney failure, cancer, paralysis, stroke, heart attack, heart surgery, and multiple sclerosis among many others.
    • More recently, the PFRDA announced partial withdrawal for subscribers looking to start their own business or pursuing higher education for purposes of improving their employ-ability.

    Benefits offered by NPS

    The National Pension Scheme offers subscribers a number of benefits. These are as follows:

    • The NPS is open to every Indian citizen and is entire voluntary
    • The subscriber has the freedom to decide how much they are willing to contribute
    • The application process is extremely convenient and easy
    • It offers subscribers versatility by allowing them to choose where to invest their money in as well as who should manage their investments
    • The subscriber can access his NPS account from anywhere in India at any time
    • Since the PFRDA controls the NPS, there is strict adherence to standards. Evaluation of the performances of fund managers also take place on a routine basis.

    Eligibility criteria for NPS

    The NPS is open to all Indian citizens, regardless of whether they are residents or NRI’s. In order to subscribe to NPS, the following criteria must be met:

    • The subscriber is required to be at least 18 years of age and not more than 60 years of age at the time of submitting his or her application to the POP
    • The applicant must be of sound mind
    • The applicant must be a first-time subscriber to the NPS
    • The applicant must adhere to the KYC rules set by the Pension Fund Regulatory Development Authority (PFRDA)

    The following individuals are not eligible to avail of the NPS

    • Individuals who are not of sound mind
    • Individuals who already hold accounts with NPS previously
    • An undischarged insolvent

    Age Limit of NPS

    The PFRDA (Pension Fund Regulatory and Development Authority) recently increased the upper age limit for joining NPS (National Pension Scheme) to 65 from 60 years.

    The pension regulatory board has approved the change and would shortly make the official announcement. NPS is currently available to people between 18 years and 60 years of age only. The scheme, however, allows contributions to the pension fund until the age of 70 years. The reason behind this government reform in NPS is to allow for easy portability of retirement funds and make NPS more desirable for customers. Government aims to open up NPS to sectors that don’t have employer pensions. Only around 15% to 16% employees in the country come under a pension scheme. This is because most of the workforce (85%) works in the informal/unorganized sector.

    Even a 1% difference in scheme cost over 25 years to 30 years can make a difference of 15% to 16% by the end of the scheme because of compounding. Management charges for NPS fund is also the lowest (0.01%), when compared to other funds which charge 0.4% or 0.5%. Moreover, NPS provides the best returns in the industry.

    Applying to the NPS

    • The first step involves filing an application to obtain a Permanent Retirement Account Number (PRAN). This can be done by picking up an application form from any Point of Presence–Service Providers (POP-SP). A POP-SP is any financial institution that is authorized as a collection point for NPS subscribers. A PRAN can also be obtained by visiting the NSDL website.
    • Once the form has been filled, it has to be submitted to the POP-SP along with KYC verification documents such as the Aadhaar and PAN.
    • Following the KYC verification, the subscriber should make a minimum contribution of Rs.500.
    • When the application is being processed, the applicant receives a receipt number to help track the status of their PRAN card.
    • Once the application is reviewed and the KYC verification is complete, the PRAN Card is sent to the Central Recordkeeping Agency (CRA) that corresponds to the applicant’s registered address.

    Subscribers can begin their contribution once they receive their PRAN card.

    Swavalamban Pension Yojana/NPS

    The Swavalamban pension Yojana scheme of the NPS - Lite was introduced with the main objective of helping people from financial and economically backward sections to secure their future. The NPS - Lite scheme is structurally based on servicing of groups as a whole as well as on low charges. Organizations called ‘Aggregators’ will take charge of people from these particular groups and will provide assistance with regards to registration, transfers and maintenance of pension contributions. Through these organizations, subscribers can join and make contributions provided they are between the ages of 18 and 60.

    As per this scheme, the Indian government made a contribution of Rs 1,000 to each individual NPS account for the initial four years after the opening of the account in the year 2010-11. Currently the Atal Pension Yojana has replaced this scheme, where any subscriber who is less than 40 years becomes eligible to receive pension up to an amount of Rs 5,000 once he attains 60 years of age.

    Features of Swavalamban Pension Yojana/NPS-Lite

    • A PRAN Card is allocated to each subscriber under this scheme
    • Contributions made monthly can be of any amount. Following the successful launch of the NPS, the government launched the New Pension Scheme to broaden the reach of the plan. Under the New Pension Scheme, government employees are required to make a 10% contribution to their Tier I account
    • Tier I accounts are mandatory if a subscriber wishes to open a Tier II account
    • Another account called the Swavalamban account is one where the Government makes an annual contribution of Rs.1,000 for a period of 4 years. This account was created specifically for employees in the unorganized sector from low economic backgrounds.
    • As per guidelines set by the government, 85% of the funds are to be invested in debt securities, while 15% is to be invested in equity
    • Fund managers include IDFC, SBI, Reliance, UTI, Kotak and ICICI. The subscriber has the option to choose three of them
    • NPS Lite Aggregators will receive account statements with regards to all transactions that take place as well as the corpus market value. This statement will be distributed to the subscribers on an annual basis

    Asset Classes

    The investment in the NPS depends on the investment portfolio of the subscriber. The investment in the scheme is split up into asset classes. They are:

    • Class A: Class A investments are those that are made in alternative resources such as real estate and infrastructure.
    • Class E: Class E investments refer to investments made in equity market instruments.
    • Class C: Class C investments are those that are made in fixed income investment instruments. These investments do not include government securities.
    • Class G: Class G investments are those that are made in government securities.

    The allocation of these assets can be customized to suit the preference of the subscriber. The proportion of investment in these assets varies based on the type of investment portfolio the subscriber chooses. These accounts are the Active Choice and Auto Choice and they differ based on the amount of equity exposure the subscriber wants.

    Auto Choice

    Auto Choice subscribers are those who require guidance on where they should allocate their assets. All subscribers to the NPS are allotted this type of account unless they specifically choose the Active Choice option. The exposure to equity and allocation of assets is largely dependent on the age of the subscriber. A subscriber between the ages of 18 to 35 years has 50% of his or her contribution invested in Class E, 30% in Class C, and 20% in Class G. This proportion of investment changes when the subscriber crosses age 35. Class E investments begin to decrease gradually as the subscriber ages and investment is Class E and Class G increase every year until the subscriber is 55 years old.

    The Auto Choice option functions on the basis of a life cycle approach. The cap on equity exposure for a subscriber who chooses the auto choice option is 50%. A recent notification from the PFRDA announced the decision to increase equity exposure for Auto Life subscribers to 75%. Subscribers can either choose to be more aggressive with their equity investments or more conservative, with equity investments as low as 25%. The exposure to equity decreases by 15% when the subscriber turns 55 years old and continues to decrease by 15% as time passes.

    Active Choice

    Subscribers who select the Active Choice option do not require guidance on how their assets should be allocated. Subscribers can choose their fund manager and then decide on the proportion of their contribution to be invested in Class E, C, and G. At present, the cap on equity exposure for Active Choice subscribers is 50%, but the PFRDA proposed to increase the limit to 75% for subscribers under the age of 35.

    Subscribers can shift from Active Choice to Auto Choice and vice versa. However, they can make only one shift every financial year.

    Pension Fund Regulatory & Development Authority

    The PFRDA is an independent regulatory body that was set up by the Indian government to regulate and oversee pension funds in India. It is the official regulator for the National Pension Scheme and regulates the workings of the system intermediaries such as the CRA, all pension fund managers, the NPS Trustee Bank etc

    The PFRDA’s main objective is to encourage citizens to secure themselves financially by protecting the subscriber’s pension funds as well as their interests. The PFRA is also authorized to regulate any pension fund that does not fall under the purview of any other law, and ensures that the NPS is administered as per the rules and provisions laid down in the PFRDA Act.

    Central Recordkeeping Agency (CRA)

    The CRA or Central Recordkeeping Agency was set up for the NPS after the PFRDA and NSDL e-Governance Infrastructure Limited came to an agreement. The CRA is a key component of the National Pension System and is vital to its working. As per the guidelines of the NPS, every employee who has commenced working for the government is required to open up an account with the CRA. This account in turn will be assigned a unique PRAN for identification.

    The most important duties and roles of the CRA are as follows:

    • Providing services to all NPS subscribers with regards to administration and Recordkeeping
    • Ensuring that each individual subscriber is issued with a unique PRAN
    • Overseeing the issuance of PRANs to subscribers through a database
    • Recording any transactions that take place in relation to each individual PRAN
    • Providing an interface between NPS intermediaries and the PFRDA
    • Keeping a check on contributions by subscribers as well as relaying any relevant instructions and information to the corresponding pension funds on a day to day basis.
    • Providing subscribers with statements relating to their PRANs
    • Allocating other functions as per PFRDA rules and regulations

    The CRA is also in charge of providing connectivity to the PFRDA and other intermediaries such as the Trustee Banks via electronic means.

    Which individual/entities can avail NPS Scheme?

    Any Indian citizen aged between 18 years and 60 years at the time of submitting their application with the POP or POP-SP, is eligible to avail of the NPS. These individuals include any of the following:

    Individuals employed with Central Government

    Any individual newly employed with the Central Government as well as Central Autonomous Bodies is eligible to join the NPS provided they have commenced service on the 1st of January 2004 or any time after.

    Individuals employed with State Government

    Individuals employed with State Governments as well as State Autonomous Bodies, but who have commenced service following the notification date set by their respective State Governments, are eligible to join the NPS.

    Corporates

    Corporates can opt to subscribe to the NPS and have the option to choose a Pension Fund Manager as per their requirements. This allows for flexible choice of investments and the additional benefit of deciding the amount of funds to be directed to the different asset classes on offer.

    Applicants belonging to the unorganized Sector - Swavalamban Yojana

    Any Indian citizen aged between 18 years and 60 years at the time of submitting their application, who is a part of the unorganized sector or is not a regular employee of the State or Central government or any of their undertakings, is eligible to open an NPS - Swavalamban account. However, the applicant must not already be covered under the following social security schemes:

    • The Jammu and Kashmir Employees' Provident Fund Act, 1961
    • The Assam Tea Plantations Provident Fund and Pension Fund Scheme Act, 1955
    • The Coal Mines Provident Fund and Miscellaneous Provisions Act, 1948
    • The Seamen's Provident Fund Act, 1966
    • Employees' Provident Fund and miscellaneous Provisions Act, 1952

    How to calculate pension received from NPS Scheme?

    Whenever calculating the amount of pension an individual will receive from the NPS, it is important to note that the money that the subscriber has invested will not grow at a predetermined rate and that the NPS will not pay the pension amount to the subscriber directly.

    The individual will have to take responsibility with regards investing on a regular basis in the scheme, which in turn will invest the money on the behalf of the individual. After the individual reaches the age of 60, he or she will be required to invest the money received in order to obtain a regular income after retirement.

    Calculating the amount of pension a person receives can differ from individual to individual due to many factors, such as their risk profile, their choice of fund manager, the fund manager’s performance as well as the approach to investment of the individual’s money.

    Individuals can make use of NPS calculator that can be found on many websites on the internet. These calculators base pension calculations on the following parameters:

    • Contribution Amount
    • Frequency
    • Rate of Interest
    • Number of Years

    Interest rates offered by NPS

    Due to the fact that the NPS invests subscriber’s money into a broad range of investment options, the NPS does not offer any particular interest rate. In general, the NPS Interest rate is anywhere between 12% - 14% interest, which is still on the higher side when taking other investment options into consideration.

    Subscribers can avail the following tax benefits under NPS

    Subscribers can avail the following NPS Tax Benefits:

    • Tax deductions under Section 80CCE, which states that the total amount of deduction shall not be more than Rs 1 lakh under Section 80CCD and Section 80CCC
    • Tax deductions under Section 80CCD (2) with regards to contributions made by the Central Government.

    These tax benefits can only be availed by subscribers with Tier I accounts.

    Taxation and Withdrawal

    In addition to helping save for retirement, the NPS also has a number of tax benefits. NPS subscribers are eligible for tax deductions up to Rs.1.5 on their contribution under Section 80C of the Income Tax Act.

    On maturity, 40% of the sum withdrawn is free from taxation. The remaining 60% is taxable. However, 40% of the sum accumulated in an NPS account is used to purchase annuities. NPS subscribers can also choose to withdraw the sum in their account before maturity under specific circumstances. In cases where the subscriber is below 60 years old, the subscriber can withdraw only 20% of the amount in their account. The remaining is invested in annuities. However, a partial withdrawal is only permitted after the subscriber has completed 10 years of contribution. In cases of emergencies, subscribers who have contributed for a minimum of 3 years to the scheme can withdraw up to 25% of the corpus.

    Charges levied by POP’s & CRA

    In the case of Tier I accounts, the employer is required to pay all fees and charges. However with regards to Tier II accounts, the subscriber is liable to pay for all transnational and activational charges. The following are the charges that falls under (Points of Presence )POP & CRA(Central Recordkeeping Agency )

    The CRA levies the following fees and charges:

    PRA account opening fees - Rs 50
    PRA account maintenance charges - Rs 190 per year
    Transaction fees - Rs 4 per transaction

    The POP levies the following fees and charges:

    Registration fees at initiation - Rs 100
    0.25% of the initial amount contributed by the subscriber for contribution upload as well as any transactions pertaining to contributions uploads thereafter
    If any transactions are made wherein the subscriber has not made a contribution - Rs 20

    It is important to note that these fees are chargeable from the date of joining and any other charges and services taxes may be imbued in line with current tax laws.

    Procedures to check balance in National Pension Scheme statement online

    Subscribers can check their balances in Tier I and Tier II accounts by following the steps below:

    • First open the main website of the CRA and NSDL via the following link https://cra-nsdl.com/CRA/
    • Login as a subscriber to access the balance details under NPS
    • Login by entering your user ID and password, which is the PRAN number allocated by the NSDL to each individual subscriber
    • Following the log-in procedure, head to the ‘Views’ tab shown under that particular transaction statement
    • This will provide the subscriber with details of where his money is invested as well as the fund managers appointed to manage his investments
    • The subscriber can also check the aggregate amount that has been invested by both himself as well as the government, including any returns he might have accrued
    • Tier II balance details can be accessed by heading to the ‘Account Details’ section, which is shown at the bottom

    Generation of returns through NPS

    Any returns that subscribers accrue through the NPS are usually borne after the NPS invests funds in a broad range of securities such as government securities, equity and corporate debt. Due to the good performance in both debt and equity markets, fund managers have attained good returns for subscribers in recent times.

    Rules regarding withdrawals from NPS

    Withdrawal from the NPS Scheme is allowed by the PFRDA only under the following conditions:

    • If a minimum of 40% of the total accumulated pension of the subscriber is used for the purchase of annuities, then the remaining accumulated balance is given to the subscriber in the form of a lump sum
    • In the event of the death of the subscriber, the total pension that the subscriber has accumulated will be paid to his or her nominee
    • If a minimum of 80% of the total accumulated pension of the subscriber is used for purchasing annuities, then the remaining balance will be given out to the subscriber in the form of a lump sum.

    Rules regarding withdrawal from NPS for both Tier I & II

    The main rules with regards to withdrawals made from Tier I and Tier II accounts are:

    • Withdrawal from Tier-I accounts: Should the subscriber complete service of 15 years, then he will be eligible to make withdrawals before maturity. Should he complete service of 25 years then he can make withdrawals totaling to 50% of his contribution. These withdrawals can be made in case of serious emergency or similar situations.
    • Withdrawal from Tier-II accounts: No restrictions on withdrawals exist on Tier-II accounts. Subscribers have the freedom to make withdrawals whenever they so choose depending on their needs and requirements.

    General premature withdrawal rules for both Tier I & II

    There are a number of basic and generic rules regarding premature withdrawals from NPS Scheme as far as both Tier I and Tier II accounts are concerned:

    • The subscriber is allowed to make partial withdrawals of a maximum of 25% of the contribution
    • Only three premature withdrawals are allowed per subscriber
    • In order to be eligible to make premature withdrawals, subscribers are required to have made contributions towards the NPS for at least 10 years
    • In the event of any major emergency such as a major illness, then premature withdrawals can be allowed to meet treatment expenses
    • Premature withdrawals can also be made to meet educational and marital expenses of the subscriber’s children
    • Premature withdrawals can also be made by a subscribed should he intend to buy a house for the first time

    Procedures & documentations required for NPS withdrawals

    Any subscriber looking to stop making contributions to the NPS is required to fill up, complete and submit a withdrawal application form to his or her respective Point of Presence.

    • The subscriber is also required to submit the documents mentioned below with the withdrawal forms:
    • Original PRAN card
    • Identity Proof such as Passport, PAN Card, Driver’s License etc
    • Address Proof such as Passport, Voters ID, Aadhar Card etc
    • Bank certificates or canceled cheques that contain the name of the subscriber as well as his bank account number with IFSC code. This is required for transfer of funds either electronically or through a direct credit
    • Following authentication of all documents, the Point of Presence will then send them to the CRA and NSDL
    • The CRA will then ensure that the claim is registered and the required application forms and documents are submitted
    • Following the receipt of the documents, the CRA will ensure that the application is processed and the account is settled

    Filing Withdrawal Claims

    The following is the procedure for filing a withdrawal claim for an NPS account.

    • A withdrawal claim must be filed at the nodal office of the Central Recordkeeping Agency (CRA) or the National Pension Scheme Trust.
    • The amount permitted for withdrawal is restricted to 25% of the funds accumulated in the subscriber’s account, excluding the contributions made by the employer.
    • Withdrawal claims filed for constructing a home should be verified with proof that the property belongs to the subscriber or is held jointly with their spouse. Additionally, the withdrawal is only permitted of the subscriber does not own other property apart from their ancestral property.
    • When making claims for withdrawal for treatments for medical illnesses for the subscriber, the request for withdrawal can be made by the subscriber’s family member.
    • A subscriber is only permitted to make 3 withdrawals during the tenure of the NPS.

    NPS Withdrawal Forms

    The Indian government has separated all NPS withdrawal Forms into three different categories:

    • Employees of the Government
    • Subscribers belonging to corporates
    • Swavalamban or unorganized sector subscribers

    Withdrawal Forms pertaining to Government employees

    • Form 101GS - Employees in government service can avail of this form should they choose to withdraw their accumulated pension following their retirement
    • Form 102GP - Employees in government service can avail of this form should they choose to withdraw their accumulated pension before their time of retirement
    • Form 103GD - Nominees or any legal heir of an employee with the government who is a part of the NPS, can avail of this form in order to claim the pension accumulated in the account of the subscriber.

    Withdrawal Forms pertaining to Corporate Subscribers

    • Form 301 - Corporate employees as well as other individuals and citizens who opt for withdrawal of their total accumulated pension following retirement can use this form
    • Form 302 - Corporate employees as well as other individuals and citizens who opt for withdrawal of their total accumulated pension before retirement can use this form
    • Form 303 - Nominees or any legal heir of a corporate employee can avail of this form in order to claim the pension accumulated in the account of the subscriber.

    Withdrawal Forms pertaining to Swavalamban Subscribers

    • Form 501 - Any subscriber who is a part of the Swavalamban sector can use this particular form to make withdrawals of their total accumulated pension following their retirement
    • Form 502 - Any subscriber who is a part of the Swavalamban sector can use this form to make withdrawals of their total accumulated pension before their retirement
    • Form 503 - Any nominee of a person who is a part of the Swavalamban sector can make use of this form to claim the total pension amount in the account of the subscriber

    Death benefits provided under NPS

    As per the guidelines of the National Pension Scheme, the nominee of the subscriber is allowed to withdraw, as a lump sum, the total pension amount that has been accumulated in the account of the subscriber in the unfortunate event of his or her death.

    In order for a nominee to have the NPS Death Benefits, he or she is required to provide the following documents:

    • The relevant and form pertaining to withdrawals should be completed and submitted depending on the subscriber’s employment status
    • The PRAN Card in original
    • A canceled cheque showing relevant details of the nominee such as his or her bank account number as well as IFSC Code
    • The subscriber’s death certificate
    • Any document or certificate that proves that the person claiming the amount is the legal nominee or heir of the subscriber
    • The nominee’s ID proof as well as Proof of Address

    National Pension Scheme (NPS) is a pension plan designed and regulated by the PFRDA. Citizens (including NRIs) between the age group of 18 years to 55 years are eligible for enrollment in the NPS scheme. While NPS is compulsory for government employees, it acts purely as a voluntary contribution system for others. NPS assures a fixed income for a definite period after retirement. PFRDA has appointed 7 fund managers to handle the investment portfolios, and they are as follows:

    • HDFC Pension Management Company Limited
    • ICICI Pension Fund Management Company Limited
    • Kotak Mahindra Pension Fund Limited
    • LIC Pension Fund Limited
    • Reliance Capital Pension Fund Limited
    • SBI Pension Funds Private Limited
    • UTI Retirement Solutions Limited

    How to contribute towards NPS Scheme?

    To contribute towards NPS you need to register for PRAN. PRAN or Permanent Retirement Account Number is a 12 digit unique identification number issued to subscribers of NPS. PFRDA in collaboration with NSDL has set up a Central Bookkeeping Agency that stores all member related information in its records. NSDL is the authority responsible for issue of PRAN. The below points illustrate how to apply for a Permanent Retirement Account Number.

    Documents required for issuing PRAN

    • Your PAN card details are needed for issue of PRAN
    • In case you don’t have a PAN card, your Aadhaar would suffice
    • Your bank account details
    • Address proof
    • Photograph and scanned copies of signature

    Online registration for NPS Scheme

    • To register for NPS online, paste the following URL in your browser https://enps.nsdl.com/eNPS/OnlineSubscriberRegistration.html?appType=main
    • Select new registration and in the section below choose Individual Subscriber
    • Further under the columns listed, select your citizenship and choose from Aadhaar or PAN card to register with, and fill in the details
    • Also, select the type of NPS account that you wish to open
    • If you have selected PAN, then also select your bank where you maintain a savings or current account from the drop down menu. If your bank is not listed in the drop-down, you can apply for PRAN offline
    • Click on continue and it will navigate to the Subscriber Registration page where you will be required to fill in the following information:
    • Fill in your personal details in the first section
    • After entering the details the system will generate an acknowledgment number, which will be required for later purpose
    • In the Contact Details section provide the details as mentioned in your address proof
    • Complete the fields in the other two sections—Bank Details and Scheme & Nomination Details
    • In the section that follows, upload your photograph and scanned signature
    • After paying the required minimum amount, you will be allotted a Permanent Retirement Account Number (PRAN)

    After completion of the registration process you need to take a printout of the form, fix your photo and sign it. Send this form to the below mentioned address within 90 days from the date of online registration:

    Central Recordkeeping Agency (eNPS),

    NSDL e-Governance Infrastructure Limited,

    1st Floor, Times Tower,

    Kamala Mills Compound, Senapati Bapat Marg,

    Lower Parel, Mumbai – 400 013

    You will receive your PRAN card as a registered post on the same address that you have provided at the time of registration.

    Checking status of PRAN

    • To check your PRAN status you need to first access the following link https://cra-nsdl.com/CRA/pranCardStatusInput.do
    • Click on the appropriate options provided for dispatch status and press submit
    • The status of your PRAN will be displayed
    • You can also check your PRAN status by calling 022 4090 4242 or by sending an email to eNPS@nsdl.co.in.
    • You can also check your PRAN status offline by going to your nearest Point of Presence-Service Providers (POP-SP) and filling in the requisite form

    NPS vs Atal Pension Yojna

    National Pension Scheme Atal Pension Yojna
    Minimum age for enrollment: 18 years Maximum age for enrollment: 60 years Minimum age for enrollment: 18 years Maximum age for enrollment: 40 years
    The minimum contribution for tier1 and tier2 NPS accounts are Rs.6000 p.a and Rs.2000 p.a respectively The amount to be contributed depends purely on the individual's age at the time of opting for the plan
    No limit on maximum contribution The maximum limit is determined based on individuals age
    There is no limit on maximum pension amount received The maximum pension limit of Rs.5000
    NPS subscribers can opt out of the scheme by withdrawing 20% of the accumulated amount as a lump sum and the remaining as a series of annual sums Cannot opt of the scheme before attaining 60 years of age
    Contributions up to Rs.1,50,000 are exempted under the Income Tax Act Contributions are fully exempt under Section 80C and Section 80CCD of the Income Tax Act

    NPS vs PPF

    National Pension Scheme Public Provident Fund
    NPS offers tax benefits up to Rs.1.5 lakhs under section 80CCD (1) of the Income Tax Act and up to Rs.50,000 under section 80CCD(1B) Offers tax benefits up to Rs.1.5 lakhs under section 80C of the Income Tax Act
    Employer contributions are eligible for tax benefits Not applicable to PPF funds
    Allows partial withdrawals subject to stringent conditions Very few restrictions are imposed on partial withdrawals
    Does not provide loan facility You can apply for loans against your accrued PPF balance
    Provides you an option to invest in equities and government bonds Provides only the announced interest rates for the fiscal year
    Premature closure of account is possible Cannot close the account before maturity, i.e. 15 years from the date of enrollment
    NRIs can invest in NPS As per the rules, NRIs cannot enroll for PPF scheme

    NPS vs EPF

    National Pension Scheme Employee Provident Fund
    NPS is a voluntary scheme that allows one to contribute any amount above Rs.6000 a year for Tier I and Rs.2000 a year for Tier II EPF is compulsory for all employees in the organized sector with an income of above Rs.15,000 per month
    You can select your fund manager from the organizations listed by PFRDA All EPF accounts are managed by the EPFO
    Voluntary contributions are made by subscribers at any chosen time period 12% of the employee contribution is matched with 12% of the employer contribution
    Interest rate depends purely on your choice of fund manager and asset allocation Interest rates are announced each year by the Finance Ministry in consultation with the EPF trustees

    NPS vs Mutual Funds

    National Pension Scheme Mutual Funds
    More liquid than EPF but less when compared to mutual funds Offers high liquidity
    Subscribers can choose only one fund manager out of the 8 options available no such restrictions on mutual funds
    Operational costs are less Higher when compared to social security schemes
    Maximum age at entry is 60 years No upper age limit

    Charges Under NPS

    Points of Presence (PoP)

    Points of Presence are banks that are appointed for opening NPS accounts by the PFRDA. The following are the charges that an individual has to incur when opening an NPS account offline:

    • Initial subscriber registration- Rs 200
    • Initial contribution upload - 0.25% of the employee’s contribution
    • Transactions following the opening of the account - 0.25% of the employee’s contribution
    • Transactions unrelated to contributions – Rs 20
    • eNPS for contributions that follow – 0.10% of the employee’s contribution
    • Persistency – Rs 50

    Central Recordkeeping Agency (CRA) Charges

    The CRA is responsible for keeping a record of all NPS subscribers. Additionally, it is also responsible for customer service and administrative functions. The following are the charges levied by the CRA:

    • PRA opening charges – Rs 40
    • Annual cost of PRA maintenance –Rs 40
    • Charge for each transaction – RS 3.75

    In addition, the CRA also has other charges such as the Investment Management Fee, which is 0.01% of the contribution; as well as the Custodian Fee of 0.0032% and NPS Trust Fee of 0.01%.

    Exiting from NPS

    Subscribers can exit the NPS in the following cases: retirement, attaining the age of 60, death and premature exit. Exiting the scheme can be done by either submitting a form in person or online.

    Offline Process

    Government employees can submit a physical for at a Nodal Office that in turn submits the claim online. Non-Government employees can submit the form at PoP and can have an online filed by the PoP.

    Online Process

    Exit can be made online by logging on and registering to the CRA website. Once registered, employees can request an exit withdrawal. The form would require the employee to select the type of exit. A claim ID will have to be generated at the Nodal Office in case the exit is premature.

    Some of the top performing NPS schemes are the HDFC Pension Fund, ICICI Prudential Fund, Kotak Pension Fund and the LIC Pension Fund.

    NPS Helpline

    NDSL offers a myriad of helpline services to attend the concerns of NPS subscribers. You can reach out to NPS customer care cell on their toll free number or contact any of the NDSL branches for all information related to your NPS account. Given below are the details:

    NPS Toll Free Number: 1800222080

    Mumbai Branch

    NSDL e-Governance Infrastructure Limited 1st Floor, Times Tower, Kamala Mills Compound,

    Senapati Bapat Marg,

    Lower Parel,

    Mumbai- 400013

    Phone: 022 40904242

    Kolkata Branch

    5th Floor, The Millenium,

    Flat No. 5W, 235/2A,

    Acharya Jagdish Chandra Bose Road,

    Kolkata - 700 020,

    Phone: 033 22814461/ 22901396

    Chennai Branch

    6A, 6th Floor, Kences Towers,

    #1 Ramkrishna Street, North Usman Road,

    T. Nagar,

    Chennai - 600 017

    Phone: 044 2814 3917/18

    New Delhi Branch

    409/410, Ashoka Estate Building,

    4th floor, Barakhamba Road,

    Connaught Place,

    New Delhi - 110 001

    Phone: 011 23705418/2335381

    Ahmedabad Branch

    Unit No. 407, 4th floor,

    3rd Eye One Commercial Complex Co-op. Soc. Ltd.,

    Above Vijay Sales Stores C. G. Road,

    Near Panchvati Circle,

    Ahmedabad - 380 006.

    Phone: 079 26461376

    NPS is one of the most affordable pension solutions that comes with a multitude of features and benefits. Deposits under NPS Schemes accumulate higher interests due to the equity fraction linked with the investments. The scheme which was available only for government employees was opened to the general public in 2009. NPS which is currently in its developing stages is expected to offer greater benefits as it gains momentum

    FAQ’s

    1. Following retirement, are employees engaged in government service eligible for leave encasement as per the guidelines of the NPS?

    No. Leave encasement is not allowed as per the guidelines laid down by the CCS and does not count as a component of the benefits available to the employee after retirement.

    2. What is the reason behind the compulsory utilization of a minimum of 40% of the accumulated pension funds to buy annuities after retirement?

    The main reason behind this move is to ensure employees in government service will still obtain a regular and stable income every month following their retirement.

    3. Which body is responsible for the calculation of interest with regards to the NPS?

    The interest is calculated by the The Pension Accounting Office, who is the official body appointed for this particular task

    4. Which agency or office will be responsible for contribution deductions In the event of the transfer of an employee during the course of the month?

    The office that draws the salary of the subscriber for the maximum amount of time during the month will be responsible for the deduction of contribution towards the NPS

    5. What are the KYC documents required to enroll for NPS through SBI?

    The following documents are required to be submitted at the time of making the application:

    • Subscriber registration form
    • Photo ID proof
    • Proof for Date of Birth
    • Proof of residence

    6. What are the different modes of payments available with SBI Pension Funds Pvt. Ltd.?

    The following modes are accepted by SBI for NPS premium payments:

    • Direct payment at an SBI Life branch
    • Through standing order on credit card
    • Online payments
    • Electronic Clearing Service
    • Payments through SBI Life’s mobile app
    • Through National Automated Clearing House (NACH)
    • Through POS terminals at authorized SBI Life branches

    7. How to check the status of your NPS account in SBI?

    Simply login to the SBI Life customer portal and fill in details such as Customer ID and NPS policy number to view your current status.

    8. What are the minimum contribution amounts for Tier I and Tier II accounts?

    The minimum contribution amount for Tier I accounts is Rs.500 per month and that for Tier II accounts is Rs.250 per month. Subscribers should also maintain a minimum balance of Rs.6000 for Tier I and Rs.2000 for Tier II at the end of the year.

    9. How does SBI settle the NPS claims?

    You need to submit the settlement form along with the essential documents for claim settlement at the branch where you maintain your NPS account. For details on claim settlements you can send an email to claims@sbilife.co.in. The final decision on claims will be based on the disclosures made in the proposal form by the subscriber.

    10. Who provides annuity on withdrawal or maturity under NPS?

    The insurance companies licensed by the IRDA and authorized by the PFRDA act as the annuity service providers to NPS subscribers.

    11. Is NPS an easily accessible system of long term investments?

    NPS is a cost effective, flexible and portable retirement savings scheme in which the wealth accumulated depends on the contributions made by the individual.

    12. How many subscribers does NPS have?

    The total number of NPS subscribers as on 30 Dec, 2016 is 1,02,76,250.

    13. What are the features of NPS app?

    Using the NPS app, you can raise a request for transaction statement for the particular fiscal year. You can also view the details of scheme wise units and update your contact information.

    Important NPS Related Reads

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    News About NPS

    • Here are the Changes in NPS Rules for 2018

      The 2018 Union Budget brought a lot of changes to a number of government-run savings schemes. One of these changes includes a revision of the withdrawal rules for the National Pension Scheme (NPS). Here are a few areas where changes have been implemented: Partial withdrawal, Extension of tenure, Recovery of dues.

      NPS subscribers with a Tier I account can now withdraw up to 25% of the amount accumulated in their NPS account, which is a 5% increase from what was previously permitted. Higher education, critical medical illnesses, construction or purchase of a house, and funding marriage expenditure are some instances where partial withdrawal is permitted. The conditions that make a subscriber eligible for partial withdrawal are a minimum 3-year contribution to the scheme and sufficient documentation in cases of illness. Additionally, the subscriber is only allowed a maximum of 3 withdrawals during the tenure of their subscription.

      NPS subscribers will now be permitted to continue contributing to the scheme even after crossing 60 years. Subscribers can continue contributing to their NPS accounts up to the age of 70 years. Subscribers will have to inform the NPS Trust of the extension at least 2 weeks before they turn 60 years old.

      State and Central government employees who have any dues that need to be paid at the time of retirement can have the corpus in their NPS account withheld until the dues are recovered. The changes mentioned above were proposed changes to amend the previous NPS rules.

      13 June 2018

    • 22 Lakh new Jobs in 6 months

      The EPFO (Employees’ Provident Fund Organization) and the NPS (National Pension Scheme) has released the latest payroll data which shows a steady increase in employment in the last 6 months. As per the data, around 22 lakh jobs have been created in the country in the 6-month span, ending February 2018.

      The EPFO data show that around 31 lakh employees have opened their accounts with the organization, out of which 18.5 lakh belong to the 18-25 years age bracket and has been identified as new joinees. The NPS data recorded around 3.5 lakh central and state government employees who have opened new accounts with them. The combination of both the figures show an employment generation of 22 lakh.

      22 May 2018

    • PFRDA to allow NPS Subscribers Partial Withdrawal for Setting up Business

      National Pension Scheme (NPS) subscribers will now be permitted to withdraw a portion of the funds in the account for the setting up a new business venture or to pursue higher education. The Pension Fund Regulatory Development Authority (PFRDA) issued a notification after a board meeting to discuss the issue.

      The pension fund regulator’s statement issued elucidated the circumstances that make a subscriber eligible for a partial withdrawal. NPS subscribers will be allowed to withdraw funds from their account if they wish to increase their employability by acquiring new skills or higher education. This announcement comes shortly after the PFRDA announced the increase in equity investment limits for their Active Choice subscribers. The change will mean Active Choice subscribers will now be able to invest upto 75% in equity investment as opposed to the current 50%. This option, however, is only open to subscribers upto the age of 50.

      The PFRDA has over 2 crore subscribers for the NPS and Atal Pension Yojana (APY) combined. Additionally, the PFRDA also has over Rs. 2.3 trillion in asset under management (AUM).

      10 May 2018

    • Kerala Expats hold the most number of NPS Accounts

      At present, NRI’s from Kerala hold the highest number of National Pension Scheme (NPS) accounts in the country. The NPS is run by the Pension Regulatory and Development Authority (PFRDA) and reports indicate that the number of subscribers has already crossed 2.1 crore. The subscribers of the Atal Pension Yojana (APY) is also included in the number provided by the PFRDA.

      The PFRDA organized an awareness programme in Kochi about the points of presence in various banks that would help make it easier for NRI’s to seek enrollment to the scheme. The point of the programme was to demonstrate the ease with which an NPS account can be opened and to encourage NRI’s to subscribe to the scheme.

      7 May 2018

    • National Pension Scheme(NPS) to continue says the Government

      Following the rumors that were surrounding the National Pension scheme, in which people were assuming the Government is all set to scrap the scheme and get back to its old defined benefit pay-as-you-go pension scheme, a government official said there is no such decision and that the National Pension scheme will continue without any hindrance. The announcement came from the Lok Sabha and they have assured thousands of National Pension scheme subscribers that there will be no scrapping of the scheme and going back to the old defined benefit pay-as-you-go pension scheme.

      9 April 2018

    • NPS Trust charges slashed by half

      In what would be a sigh of relief for NPS customers, the NPS trust charges will be slashed from 0.01% to 0.005% as per a notification that was released on March 19, 2018. As per a survey, apart from the numerous benefits that NPS customers have with the scheme, the NPS is certainly the cheapest investment option out there, in comparison to investing in mutual funds and so on. The NPS comes with charges such as the  CRA (Central Record Keeping Agency) charges, Custodian Charges, Point-of-Presence (PoP) charges and the NPS Trust charges which is rather minimal in comparison to other market-linked instrument charges. As per the NPS, a customer has to pay 0.01% to the Pension Fund Manager - which is 1/250 the normal price, 0.0032% to the Custodian, and 0.005% to the NPS Trust. For those who do not know, the NPS account of a subscriber matures when he/she reaches the age of retirement and on retirement, the subscriber has the choice of making a  withdrawal of 60% of the corpus which will be subject to TDS (Tax deducted from source) and 40% will be tax-free which will be invested in annuities. Subscribers can avoid tax by investing upto 80% of their NPS corpus in annuities.

      30 March 2018

    • Protest March organized by Railway Employees to Withdraw NPS

      The All India Railway men's Federation (AIRF) organized a protest march in Delhi to demand improvement of wages and the withdrawal from the National Pension System (NPS). According to the AIRF General Secretary, the social security provided to government employees was almost completely withdrawn after the NPS was introduced.

      It was also stated that the defined minimum pension for railway employees is no longer guaranteed for those individuals who joined the railways after 2004. The main demand of the protest march was to do away with the NPS for those employed by the Central Government. Additionally, the protest march was also organized to demand an increase in the minimum pay for railway employees from Rs 18,000 to Rs 26,000.

      The General Secretary assured that railway services would not be disrupted on account of the protest.

      23 March 2018

    • Digital NPS Investments Enabled at Lakshmi Vilas Bank

      Lakshmi Vilas banked teamed up with Fisdom to launch a digital National Pension Scheme (NPS) registration process. The bank launched the service with the Fisdom app with the bank serving as a point of presence for subscribers.

      The app eliminates the need for any paperwork for subscribing to the NPS and can be done within minutes. The app also allows users to choose the funds they wish to invest in and to track the progress of their investment. The services in the Fisdom app include KYC verification and investing in various other investment instruments.

      The MD and CEO of Lakshmi Vilas Bank has stated that the tie up with Fisdom is mainly to expand the focus of the products offered by the bank.

      23 March 2018

    • NPS Subscriber List Crosses 13 Lakh

      The Pension Fund Regulatory Development Authority (PFRDA) organized a conference in Mumbai to discuss various aspects of the National Pension System (NPS). According to the reports by the PFRDA, as of 6 March, the NPS had approximately 13.16 lakh subscribers from the private sector. The PFRDA stated in a conference that over 4,000 corporates registered close to 6.82 employees to join the NPS Corporate Model. They also announced that the All Citizen Model had over 6.3 lakh subscribers. In addition to the NPS, the PFRDA said that the Atal Pension Yojana (APY) has crossed over 2 crore subscribers.

      The PFRDA aims to increase the number of subscribers across all segments in the months that follow. The organization further stated that people should not look at the NPS as a merely a tax saving instrument but as a means of yielding returns and gaining financial security for life after retirement.

      The conference had a little over 200 attendees from various corporates in order to address various queries that individuals had about the NPS.

      22 March 2018

    • Withdrawal Norms for NPS Relaxed

      An announcement earlier this year about the Pension Fund Regulatory Development Authority (PFRDA) relaxing the rules for withdrawing funds from the National Pension Scheme (NPS).  The announcement was clarified by Shiv Pratap Shukla, the Minister of State for Finance in a written response to the Rajya Sabha.

      The PFRDA allowed partial withdrawals for NPS subscribers after contributing to the scheme for a minimum of three years. However, this was only available in certain circumstances such as critical illnesses. Under the new withdrawal norms, funds can be withdrawn after completing 3 years of contributions to the scheme and withdrawals can be made a maximum of three times in the entire duration of the subscription. Moreover, withdrawals for NPS subscribers cannot exceed more than 25% of the amount accumulated in the subscriber's account.

      21 March 2018

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