National Pension System 5.2.1. Introduction Government of India introduced the scheme from 1.1.2004 to all new employees of Central Government except.

National Pension System

5.2.1

Introduction

• Government of India introduced the scheme from 1.1.2004 to all new employees of Central Government except armed forces

• The scheme was later rolled out to all citizens from 1st May 2009

5.2.2

Objective

• A social security measure of providing regular income in the old age

• Reasonable market based returns in the long run

• Providing old age security coverage to citizens

5.2.3

What is NPS scheme?

• NPS is voluntary, simple, regulated, portable and flexible pension scheme

• Investment can be made during employable years and withdrawn on retirement with monthly pension

• Open to all citizens of India• Regulated by PFRDA, with transparent investment

norms and regular monitoring and performance review• Nomination facility available• Tax benefit available under Income Tax 1961 for the

investments

5.2.4

Types of accounts

• Tier I Pension account– This is a non withdrawable pension account

• Tier II Savings account– A voluntary savings facility. Withdrawals can be

made at any time

5.2.5

Tier I Pension account

• Builds retirement corpus• Minimum contribution of Rs. 500/- per

transaction and Rs. 6000/- in a financial year• No limit on the maximum contribution• At least one transaction in a year• Contribution through cash, DD or local

cheques; Outstation cheques not accepted • Contribution can be made at any POP_SP

5.2.6

Tier II savings account

• Not a pension account but a savings facility• Minimum contribution – Rs. 1000/- at the time of

opening account• Minimum amount per contribution – Rs. 250/-• Minimum no. of contributions in a year – 1• Minimum account balance at the end of financial

year – Rs. 2000/-• Withdrawal permitted at any time• Net asset value added to the fund

5.2.7

Who can join NPS

• Citizens of India (Resident or Non resident)• Age limit - 18 years to 60 years, as on the date

of submission of application

5.2.8

Who cannot join NPS

• Minors (persons under 18 years of age)• Insolvent persons• Persons of unsound mind• Existing subscribers of NPS

5.2.9

Guidelines for NRI investments

• Should have an account in a bank in India• Contributions subject to regulatory

requirements prescribed by RBI from time to time

5.2.10

Key stakeholders

• Point of presence (POP)– First point of interaction between the investor and the NPS

• POP_SP – Point of presence service providers – collection points ; also provide other customer services to NPS subscriber – Designated Post Offices act as POP_SPs

• Central Record keeping Agency (CRA) – National Securities Depository Limited acts as CRA for NPS; performs record keeping, administration and customer service functions for NPS subscribers

• Pension Funds(PFs)/Pension fund managers (PFMs) - Six pension funds appointed by PFRDA manage the retirement savings under NPS

• Annuity Service Providers (ASPs) – Responsible for paying regular monthly pension after the subscriber exits from the NPS

• Trustee bank – Facilitates fund transfer across various entities (subscribers, PFMs, ASPs); Bank of India is the trustee bank for NPS

5.2.11

How the funds are invested?

• In Equity (E), Government Security (G) and Corporate Bonds (C) as per the subscribers choice.

• Investments in equity only in those listed in National Stock Exchange or Mumbai Stock Exchange.

• 60% of the corpus fund from (Tier I) can be withdrawn at the age of 60 years and 40% invested with Pension Provider Company at the choice of the subscriber.

5.2.12

Choices of investment for subscriber

• Six different Pension Managers viz., ICICI Prudential Pension Funds Management Co Ltd, IDFC Pension Fund Mangement Co Ltd., Kotak Mahindra Pension Fund Limited, Reliance Capital Pension Fund Limited, SBI Pension Funds Pvt Ltd., UTI Retirement Solutions Ltd.

• Options for deciding the investment plan in “Active choice”

• Can also decide to do no option on investment plan by leaving it to “Auto choice”

5.2.13

Forms used

• Composite application form (CAF) UOS1 – used by subscribed applying for fresh Tier I and Tier II account

• Annexure NCIS – To accompany all applications• Annexure S1 – Application for allotment of PRAN• UOS10 – Form for Tier II activation to be used by

subscriber registered for Tier I and issued a PRAN card• UOS 11 – Form for Tier II activation to be used by

subscriber registered for Tier I but not issued with PRAN card

• UOS SH1 – To be used when PRAN is required in Hindi

5.2.14

Options for activation

• Tier I and II – For all Indian citizens (except those Government servants appointed after 1.1.2004 and existing NPS subscribers)

• Tier I – For all Indian citizens (except those Government servants appointed after 1.1.2004 and existing NPS subscribers)

• Tier II - For Tier I subscribers. (Govt servants appointed after 01 Jan 2004 are eligible only for Tier II activation )

5.2.15

Permanent retirement account number (PRAN)

• A unique number allotted to NPS subscriber• Allotted by CRA• Common to both Tier I and Tier II

5.2.16

Specimen PRAN card

5.2.17

Exit from NPS

• When the subscriber attains the age of 60 years

• At any time before attaining the age of 60 years

• Due to the death of the subscriber

5.2.18

Benefits on exit

Mode of exit BenefitUpon attainment of the age of 60 years

At least 40% of accumulated pension wealth utilised for purchase of annuity providing monthly pension; balance is paid to subscriber; However, the subscriber has the option to defer the lump sum withdrawal till the age of 70 years

At any time before attaining the age of 60 years

At least 80% of accumulated pension wealth utilised for purchase of annuity providing pension and balance paid in lump sum

Death of subscriber Entire accumulated pension wealth paid to nominee/ legal heir and no purchase of annuity/ monthly pension

5.2.19

Instructions for filling up of forms

Correct forms are to be used Presented at Post office counter

MUST BE FILLED IN WITH BLACK INK ONLY

WRITTEN IN BOLD LETTERS

Details should be furnished correctly A colour photograph of size 3.5 X 2.5 cm

Application is duly signed Address is complete with pin code

All mandatory data fields(*Marked) correctly filled by the applicant

Applicant must be within the Min (18) and Max (55) permissible age, on the date of application

Date of birth to be validated by valid documentary proof.

The signature should be inside the rectangle provided in the form

KYC documents (proof of identity & proof of address) to be checked

Applicant should sign self-declaration that he/ she is not a pre-existing member of the NPS

5.2.20

Information required for subscriber registration

1. Subscriber’s Colour Photo of size 3.5 X 2.5 cm2. Subscriber’s Signature/Thumb impression (left

thumb impression for Male and Right thumb impression for female)

3. Subscriber’s personal Details1. First name2. Gender3. Father’s First Name4. Date of Birth5. Complete Present and Permanent address with PIN

code.5.2.21

Information… cont’d

4.Subscriber Scheme Preference1. PFM Selection (only one)2. Asset Allocation (in case of Active Choice)

a. Total should be equal to 100%b. Equity should not exceed 50%

5. KYC Documentsc. Identity Proofd. Address Proofe. Date of Birth Proof

6. Initial contribution plus registration fee to be paidRegistration fee Rs. 100/- + applicable service tax and education cessMinimum initial contribution Rs. 500/- plus Service charge @0.25% of contribution subject to min Rs. 20/- and max Rs.25000/- plus applicable service tax and EC should be accepted

5.2.22

KYC norms

• Know Your Customer Norms (KYC) mandatory.• KYC Documents are identity Proof, Address Proof and

age proof. Passport or other govt. issued document reflecting current or

permanent address can be accepted as address proof & identity proof

Bank statement/electricity bills (for address proof) should not be dated beyond last six months from the date of application.

In case of non IRA compliant applicant, identity proof & address proof has to be taken in the form of certificate from head of office only

5.2.23

Tier II activation

• Tier II Activation will be accepted at Post Office.• Subscriber Bank details (ECS) are mandatory.• UOS-s10 application, One cancelled cheque leaf & PRAN copy

should be given.• Service charge @0.25% of contribution subject to min Rs. 20/-

and max Rs.25000/- plus applicable service tax and EC should be accepted.*

• Initial contribution Rs.1000/- is must.• Post offices(POP-SP) scan the Tier-II activation form and sent

through email/Fax to NPS nodal office for activation.

• *vide dop memo Fno.3-16/09NPS(p) Part II dt. 2.2.12

5.2.24

Subscriber servicing

Changes allowed Documents requiredName Supporting documents + PRAN card copy

Address Supporting documents + PRAN card copy

Phone/mobile no./email ID No document required

Subscriber bank details Supporting documents +copy of PRAN card if IRA compliant, in case of Tier-II, copy of a cancelled cheque

Preference for value added services, like email alerts, SMS alerts

No document required

Change in nomination details Copy of PRAN card

Employment category No document required

5.2.25

Subscriber servicing

PO to accept 1. Switch request for change in PFM/or investment

option for Tier-I and Tier-II 2. Withdrawal request 3.Print Subscriber’s account statement 4.Re-issue of I-PIN/T-PIN/PRAN card PO to collect Service charge Rs. 20/- plus applicable

service tax and EC* for these services

*vide dop memo Fno.3-16/09NPS(p) Part II dt. 2.2.125.2.26

Grievance handling

• Receiving of grievances against any PO or any other NPS intermediary in the format prescribed and forward them to Nodal PO for uploading in Central Grievance Management System(CGMS)

• The grievance shall be resolved within 7 days

5.2.27

Important information

The scheme is subject to market risks

Advise the investor to read the offer document carefully before investing

No fixed / guaranteed returnsThe investments will be calculated on

NAV basis.Subscriber can view their Investment

details & other details through internet.

5.2.28

Contact details

India Post NPS Nodal office, PTC, Mysore:Phone: 0821+2441010 Fax : 0821+2441010Email : [email protected] , Mumbai:-National Securities Depository Limited4thfloor,'A’Wing,Trade World, Kamala Mills Compound, Senapati Bapat Marg,Lower Parel, Mumbai-400013.Tel:(022)24994200(60lines)Fax:(022)24952594/24994974Tollfreenumber:1800222080

email : [email protected] web site

www.npscra.nsdl.co.in

5.2.29

NPS Transaction through ePayment

• NPS transactions are carried out in point of sale using ePayment option

5.2.30

Subscriber registration

5.2.31

Acceptance of initial contribution

5.2.32

Acceptance of subsequent contribution

5.2.33

Daily Report of NPS transactions

5.2.34

Practice

• Exercise 5.2.1 and 5.2.2

5.2.35

5.2.36