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What is the national Pension System?
National Pension System (NPS) is a defined contribution based pension system launched by Government of
India with effect from May 01, 2009 on a voluntary basis to all citizens of India. It is one of the significant social security measure introduced by the Government
of India.
What are the advantages of investing in the National Pension System?
Cheapest investment product with better growth options through long term market-linked saving
- Provides choice of various funds with a flexible investment pattern
- Individual Retirement Account for record keeping at individual level ensures
portability across geographies and employment.
- Platform to monitor and manage investment to meet subscriber's diverse
financial goals
- Employees contribution is eligible for tax exemption as per the Income Tax Act,
1961 as amended from time to time
- Offers Tier II account which is a voluntary savings facility with anytime
liquidity/withdrawal option
- Efficient grievance management through CRA Website, Call Center, Email or
Postal Mail
- Routine/quarterly disclosure of the funds helps subscriber to achieve better fund
management.
- Auto Choice option for those who do not have the required knowledge to
manage their investment.
- Release of daily NAV by PFMs to ensure subscriber can take informed decisions.
- An option to remain invested even after your retirement.
What are the tax benefits available when I invest in the National Pension System?
Individuals who contribute to the National Pension System through a corporate account will be entitled to
getting upto 10% of their basic pay exempt from income-tax if that amount has been invested in the National Pension System.
Where is my money invested when I invest in the National Pension System?
In NPS, a Corporate would have flexibility to provide Investment choice either at subscriber level or at
the corporate level centrally for all its underlying subscribers.
Details of options available are given below:
OPTION 1: Corporate option, where corporate centrally decides on behalf of all
underlying subscriber
Choice I: Systems defined for Central government employees where the
funds are allocated across to three PFMs:
- LIC Pension Fund Limited
- SBI Pension Funds Limited
NPS for Corporates
Pension Fund Regulatory & Development Authority Page | 10
- UTI Retirement Solutions Limited
Choice II: Systems available with All Citizens Model PFMs, as listed
below:
- ICICI Prudential Pension Fund Management Company Limited
- IDFC Pension Fund Management Company Limited
- Kotak Mahindra Pension Fund Limited
- Reliance Capital Pension Fund Limited
- SBI Pension Funds Limited
- UTI Retirement Solutions Limited
or
OPTION 2: Subscriber can choose any one of the following six PFMs:
- ICICI Prudential Pension Fund Management Company Limited
- IDFC Pension Fund Management Company Limited
- Kotak Mahindra Pension Fund Limited
- Reliance Capital Pension Fund Limited
- SBI Pension Funds Limited
- UTI Retirement Solutions Limited
Subscribers can have any one of the two choices:
Active Choice: Subscriber will have the option to actively decide as to how your
NPS pension wealth is to be invested across Asset class E (upto 50%), Asset Class
C, and Asset Class G;
or
In this corporate would have the option to actively decide as to how
investment would be done across Asset class E (upto 50%), Asset Class C,
and Asset Class G. This would be applicable for all its underlying
subscribers
Current allocation is SBI (32.5%), UTI (34%), LIC (33.5%). Above
allocation is reviewed periodically by PFRDA/NPS Trust based on
performance. Share of each PFM in the corpus will be decided by
PFRDA from time to time.
Auto Choice: In this option, the investments will be made in a life-cycle fund.
Here, the fraction of funds invested across three asset classes will be determined
by a pre-defined portfolio (which would change as per age of subscriber). Table
for Life cycle fund is given below.
Table for Lifecycle Fund
| Age |
Asset Class E |
Asset Class C |
Asset Class G |
| Up to 35 years |
50% |
30% |
20% |
| 36 years |
48% |
29% |
23% |
| 37 years |
46% |
28% |
26% |
| 38 years |
44% |
27% |
29% |
| 39 years |
42% |
26% |
32% |
| 40 years |
40% |
25% |
35% |
| 41 years |
38% |
24% |
38% |
| 42 years |
36% |
23% |
41% |
| 43 years |
34% |
22% |
44% |
| 44 years |
32% |
21% |
47% |
| 45 years |
30% |
20% |
50% |
| 46 years |
28% |
19% |
53% |
| 47 years |
26% |
18% |
56% |
| 48 years |
24% |
17% |
59% |
| 49 years |
22% |
16% |
62% |
| 50 years |
20% |
15% |
65% |
| 51 years |
18% |
14% |
68% |
| 52 years |
16% |
13% |
71% |
| 53 years |
14% |
12% |
74% |
| 54 years |
12% |
11% |
77% |
| 55 years |
10% |
10% |
80% |
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When can a subscriber withdraw the amount?
At any point in time before 60 years of Age
Subscriber would be required to invest at least 80% of the
pension wealth to purchase a life annuity from any IRDA –
regulated life insurance company. Rest 20% of the pension
wealth may be withdrawn as lump sum.
On attaining the Age of 60 years and upto 70 years of age
At exit subscriber would be required to invest minimum
40 percent of your accumulated savings (pension wealth)
to purchase a life annuity from any IRDA-regulated life
insurance company.
Subscriber may choose to purchase an annuity for an
amount greater than 40 percent. The remaining pension
wealth can either be withdrawn in a lump sum on
attaining the age of 60 or in a phased manner, between
age 60 and 70, at the option of the subscriber.
In case of phased manner subscriber has to withdraw
minimum 10% of the pension wealth (lump sum amount).
Any amount lying to the credit at the age of 70 should be
compulsorily withdrawn in lump sum.
Death due to any cause In such an unfortunate event, option will be available to
the nominee to receive 100% of the NPS pension wealth in lump sum.
