National Pension System (NPS)

A survey conducted by the United Nations Population Division World, life span for every individual is expected to touch 75 years by 2050, which is currently at 65 years. Initiatives of the government of India such as Swachh Bharat Mission coupled with the growing awareness of better health and sanitation have started increasing the life span of Indian citizens. Thus, the number of years that every individual would spend after retirement has increased in the past few decades in India. Given the increase in life span, rising inflation and increasing cost of living have made retirement planning a pivotal part of every person’s life today.
 

 
The government of India started the National Pension System on Jan 01, 2004 to provide Indian citizens with the vital social security after retirement to cover for rainy days ahead. At first, only new government recruits, except those working in the armed forces, could take advantage of NPS. However, effective May 01, 2009, the government of India opened NPS to all Indian citizens including those working in the unorganized sector. Pension Fund Regulatory and Development Authority (PFRDA) is the autonomous body that the government of India has set up for developing and regulating the Indian pension market. Annuity Service Providers (ASPs) such as NPS Trust, Trustee Bank, and Pension Fund Managers help is delivering monthly pension to subscribers post NPS exit. One of the major goals of NPS is to inculcate a savings culture for retirement among Indian citizens while bringing in all the required pension reforms. Pension plans covered under NPS provide you with a regular source of income after your retirement giving you the financial security and stability you need to lead a peaceful retired life. The best part is that you do not need to change your standard of living after retirement. Pension schemes covered under NPS ensure that you invest and accumulate your hard-earned money and redeem it after retirement as a lump sum or as monthly instalments under an annuity plan for retirement.
 

NPS SCHEMES AS ON 31-March-2017

SCHEME-E Tier 1

Pension Fund Inception
Date
AUM
(Rs Crs)
Subscribers NAV Returns 1 Year Returns 3 Years Returns 5 Years Returns Inception
SBI Pension Funds Pvt. Ltd 1-May-09

1026.32

235695.00

20.56

21.83%

13,24%

13.69%

9.53%

UTI Retirement Solutions Ltd. 1-May-09

129.64

36793.00

23.92

22.93%

14.16%

14.50%

11.64%

L1C Pension Fund Ltd. 23-Jul-13

220.78

49322.00

16.05

21.22%

12.49%

NA

13.68%

Kotak Mahindra Pension Fund Ltd. 1-May-09

93.30

17508.00

22.34

22.23%

13.49%

14.26%

10.68%

Reliance Capital Pension Fund Ltd, 1-May-09

57.61

10620.00

22.55

2035.00%

12.71%

13.64%

10.81 %
11.78%

ICICI Pru, Pension Fund Mgmt Co. Ltd. 1-May-09

544.66

11.55

24.16

21.42%

13.11%

13.84%

HDFC Pension Management  Co. Ltd. 1-Au -13

466.67

129756.00

17.56

22.96%

13.53%

NA

16.60%

SCHEME-C Tier 1

Pension Fund Inception
Date
AUM
(Rs Crs)
Subscribers NAV Returns 1 Year Returns 3 Years Returns 5 Years Returns Inception
SBI Pension Funds Pvt. Ltd 1-May-09

703.61

236455.00

23.28

11.96%

12.09%

11.10%

11.26%

UTI Retirement Solutions Ltd. 1-May-09

81.94

36720.00

21.13

12.04%

11.96%

11.04%

9.91%

L1C Pension Fund Ltd. 23-Jul-13

137.83

49549.00

15.14

11.64%

12.15%

NA

11.90%

Kotak Mahindra Pension Fund Ltd. 1-May-09

67.51

17591.00

23.15

12.35%

12.32%

11.50%

11.18%

Reliance Capital Pension Fund Ltd, 1-May-09

39.63

10626.00

20.86

11.99%

12.03%

11.35%

9.73%

ICICI Pru, Pension Fund Mgmt Co. Ltd. 11-May-09

.3.65.95

115696.00

23.25

12.48%

12.63%

11.63%

11.24%

HDFC Pension Management  Co. Ltd. 1-Aug-13

288.48

129260.00

15.10

12.20%

12.18%

NA

11.91%

SCHEME-G Tier 1

Pension Fund Inception
Date
AUM
(Rs Crs)
Subscribers NAV Returns 1 Year Returns 3 Years Returns 5 Years Returns Inception
SBI Pension Funds Pvt. Ltd 1-May-09

1263.35

236466.00

21.55

12.44%

13.31%

10.59%

10.18%

UTI Retirement Solutions Ltd. 1-May-09

122.90

35767.00

19.58

11.66%

12.87%

10.51%

8.86%

L1C Pension Fund Ltd. 23-Jul-13

175.85

50942.00

15.54

14.31%

1.3.76%

NA

12.68%,

Kotak Mahindra Pension Fund Ltd. 1-May-09

88.79

17262.00

19.89

12.63%

13.16%

10.66%

9,08%

Reliance Capital Pension Fund Ltd, 1-May-09

56.75

10309.00

19.43

12.50%

13.19%

10.73%

8.75%

ICICI Pru, Pension Fund Mgmt Co. Ltd. 1-May-09

422.44

112107.00

19.99

12.18%

13.16%

10.86%

9.14%

HDFC Pension Management  Co. Ltd. 1-Aug-13

376.86

127368.00

14.83

12.23%

12.83%

NA

11.36%

Scheme returns for more than 1 year are annualised
Intermediary Charge Head Service Charges* Method Of Deduction
CRA

 

 

PRA Opening charges Rs.50 Through cancellation of units

at the end of each quarter

Annual PRA Maintenance cost per account Charge per transaction Rs.190
Rs.4
POP (Maximum Permissible charge for each subscriber

 

 

 

Initial subscriber registration Rs. 100 To be collected upfront

 

 

 

Initial contribution upload 0.25% of the initial contribution amount form subscriber subject to a minimum of Rs. 20 and maximum of Rs. 25000/-
Any subsequent transaction involving contribution upload 0.25% of the amount subscribed by the NPS subscriber, subject to minimum of Rs. 20/- and a maximum of Rs. 25000/-
Any other transaction not involving a contribution from subscriber Rs.20
* Service tax and other levies as applicable, will be levied as per the existing tax laws.

(Source: PFRDA, GoI)

 
NPS – Modus Operandi:

Once a subscriber enrolls for a scheme under NPS, he/she will be provided with a unique Permanent Retirement Account Number (PRAN), which he/she can use from any location in India. PRAN will provide the subscribers with access to two diverse types of personal accounts:

– Tier I Account: A non-withdrawable account only meant for retirement savings

– Tier II Account: A voluntary savings facility where the subscriber can withdraw his/her savings at will without any tax benefit
 
Who can join NPS

– Central Government Employees

– State Government Employees

– Corporate

– Unorganized Sector Workers – Sasayama Yojana

Advantages of NPS

– Simple processes

– Portable schemes

– Regulated by PFRDA

 
Tax Benefits

– Contributions made by subscribers in Tier I account are Exempted-Exempted-Taxed (EET). Thus, amount contributed is allowed as deduction from GTI up to Rs.1 lakh according to provisions of section 80C of the Income Tax Act, 1961.

 

– Accrued appreciation on the contributed amounts and the amount that the subscriber uses to purchase annuity is not taxable.

 

– The amount that the subscriber withdraws after 60 years of age becomes taxable.

(Source: PFRDA, GoI)
 

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