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National Pension System (NPS) is a voluntary, defined contribution retirement savings system. This retirement scheme is designed to facilitate a regular income post retirement and is based on the unique Permanent Retirement Account Number (PRAN) which is allotted to every individual that applies for the same. The Indian govt. has created this scheme with security of the individual’s income in mind and offers some wonderful benefits for NPS Account holders.
The NPS has been designed to enable systematic savings during the subscriber's working life.
Benefits & Feature of NPS
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Portable And Regulated
- NPS provides seamless portability across jobs and across locations, unlike all current pension plans. It would provide hassle-free arrangement for the individual subscribers.
- NPS is regulated by PFRDA, with transparent investment norms, regular monitoring and performance review of fund managers by NPS Trust.
Offers Of Pension Fund Manager
- NPS offers a range of investment options and choice of Pension Fund Manager for planning the growth of your investments and see your money grow.
- Individuals can switch over from one investment option to another or from one fund manager to another, subject, of course, to certain regulatory restrictions.
Flexibility To Choose Fund Managers
NPS offers a range of investment options and choice of Pension Fund Manager (PFMs) for planning the growth of your investments in a reasonable manner and see your money grow. Individuals can switch over from one investment option to another or from one fund manager to another, subject, of course, to certain regulatory restrictions. The returns are totally market related.
Flexibility to choose between 7 Fund Managers:
The subscribers can choose between 7 Fund Managers namely-
- ICICI Prudential Pension Fund Management Co. Ltd.
- HDFC Pension Management Co. Ltd.
- Kotak Mahindra Pension Fund Ltd.
- LIC Pension Fund Ltd.
- SBI Pension Funds Pvt. Ltd
- UTI Retirement Solutions Ltd
- Birla Sun Life Pension Management Limited
How many times investment scheme and Pension Fund can be changed.
- Under All Citizen Model and NPS Corporates Sector Model, the subscriber or employer, as the case may be, shall have the option to change the investment choice / asset allocation (changing between Auto Choice and Active Choice or to change the ratio of allocation among asset classes under Active Choice) four times in a financial year.
- Choice to change Pension Fund will remain once in a financial year.
Choice For Distribution
- A subscriber must choose between active choice and auto choice for distribution of his contribution. If active choice is selected, the subscriber must indicate the percentage distribution between corporate, gilt and equity. The maximum investment allowed in equity is 75%.
Permanent Retirement Account Number
- Opening an account with NPS provides a Permanent Retirement Account Number (PRAN), which is a unique number and it remains with the subscriber throughout his lifetime.
The system is structured into two tiers: - Tier-I account: This is the non withdrawal Permanent Retirement Account in which the accumulations are deposited and invested as per the option of the subscriber.
- Tier-II account: This is a voluntary withdrawal account which is allowed only when there is an active Tier I account in the name of the subscriber. The withdrawals are permitted from this account as per the needs of the subscriber as and when claimed..
NPS Tax Benefit
As per the amendment made by Union Budget 2015 in tax provisions for FY 2015-16, if any customer contributes voluntarily towards the NPS system, then he would get an additional benefit of ₹ 50,000 under section 80CCD (1B) which would be over and above the ceiling limit of ₹ 1,50,000 as prescribed under section 80 CCE.
Application, Payment and Withdrawal Process of NPS
How To Apply
- Login to Internet Banking: Login to Internet Banking and enroll for NPS in the ‘Service Requests’ section.
- Confirm details & authenticate with Aadhaar OTP: Confirm the auto-populated account details like PAN, Aadhaar among others and update a few details like nominee, choice of fund manager and investment percentages. Thereafter, enter the Aadhaar OTP received on your mobile number and upload a scanned image of the signature.
- SR generation: Upon submission of the online form, a SR is generated and the NPS account gets activated on the next working day. On activation of the NPS account, ‘Permanent Retirement Account Number’ (PRAN) is sent to you via SMS on the registered mobile number with ICICI Bank and NSDL.
How To Make A Payment
You need to login to Internet Banking to make the contribution to NPS before the end of the following month. As a confirmation of contribution to the NPS account, you will get an e-mail as well as an SMS alert on your registered e-mail ID and mobile number. Thereafter, payment can be made to the NPS account any time of the year.
The process to make the payment is as below:
- Login to ICICIBank.com.
- Click on Payments & Transfer > Manage Biller > Register Biller.
- Enter NPS in the Biller name field and click on ‘Search’.
- Click on ‘Register’, below the Available Biller Section.
- Enter the PRAN received and DOB as available on ICICI Bank records & click on Next.
- Preview the details filled and click on ‘Submit’.
- The biller is successfully registered and the payment can be made after 3 working days.
- To make the payment, click on Payments & Transfer> Bill Payments > Registered Billers.
- Once the initial payment is made, subsequent payments can be made any time of the year.
Please do not make the payment before 3 working days or the same will be reversed to your Savings Account.
An annual statement for the NPS account will be issued by the Central Recordkeeping Agency (CRA). Customers can also view/ print statements by logging into the NPS app or the CRA website.
How To Withdraw
A. Upon attainment of the age of 60 years:
- At least 40% of the accumulated pension wealth of the subscriber needs to be utilized for purchase of annuity providing for monthly pension to the subscriber and balance is paid as lump sum payment to the subscriber. Howesver, the subscriber has the option to defer the lump sum withdrawal till the age of 75 years.
- In case of attainment of 60 years, exit before the age of Superannuation/attainment of 60 years, the subscribers can also initiate withdrawal requests in the CRA system, which shall subsequently have to be verified by the Nodal Office (POP/Banks) in CRA system. www.cra-nsdl.com
B. At any time before attaining the age of 60/75 years:
- At least 80% of the accumulated pension wealth of the subscriber needs to be utilized for purchase of annuity providing for monthly pension to the subscriber and the balance is paid as a lump sum payment to the subscriber.
C. Death of the subscriber:
- 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.
- Under NPS, PFRDA has entrusted the responsibility of receiving, processing and settlement of all withdrawal claims made to CRA and has created a special NPS Claim Processing Cell (“NPSCPC”) for this purpose for handling all types of withdrawal claims.
- The Withdrawal process is now online.
- NPS offers Indian citizens a low cost option for planning their retirement. Each intermediary is entitled to recover the following prescribed charges from the subscriber towards the services rendered by them:
NPS Interest Rate and Eligibility
| Interest Rate | 9% - 12% |
|---|---|
| Eligibility | All citizens from 18 years to 70 years |
- At the time of a normal exit from NPS, the subscribers may use the accumulated pension wealth under the system either to purchase a life annuity from a PFRDA empanelled life insurance company or withdraw a part of the accumulated pension wealth as lump-sum, if they choose to do so.
- ICICI Bank has been appointed by PFRDA to act as one of the Point of Presence (POP) for the NPS. Presently, we have designated branches to carry out the NPS activities as Point of Presence- Service Providers (POP-SP).
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