Presented by:

    ANKITA SIROUHIYA
ACS, M.A (ECO),
GOING THROUGH THE PRESENTATION

Stakeholders
What is NPS
Background
Eligibility, Features and Benefits
Where NPS invest our money
How it works
Withdrawal rules & Exit plans
How to register
Drawbacks
NPS Corporate Model
NPS Lite ( swawlamban scheme)
Stakeholders in NPS
PFRDA: The Pension Fund Regulatory
and Development Authority (PFRDA),a
statutory body, is the pension regulator
of India.

NPS TRUST: It is entrusted with

safeguarding subscribers' interests.

CRA: Central Recordkeeping Agency

maintains the data and records.
PFM: Pension Fund Managers for managing
the investments of subscribers, a custodian
to take care of the assets purchased by the
fund managers, and a trustee bank to
manage the banking operations.

TRUSTEE BANK: It is an intermediary which

is responsible for the day-to-day flow of
funds and banking facilities.

POP: Point of Presence work as collection

distribution and servicing arms.
WHAT IS NPS?

The National Pension Scheme is a social

security initiative by the Central Government.
It is a voluntary defined contribution pension
system in India.

It is designed to enable the subscribers to

make systematic savings during their working
life. NPS seeks to inculcate the habit of saving
for retirement amongst the citizens.
Structurally the NPS is like a combination of
a bank account and mutual fund.
Open an account to start saving

Savings are invested into pension funds that

function the way mutual funds do.

After retirement, the subscribers can take

out a certain percentage of the corpus.
You will receive the remaining amount as
monthly pensions.
The NPS provides tax benefits at the time of
making contributions, on the gains it
makes during the tenure of the account and
also at the time of withdrawal on maturity.

This is known as EEE. ( exempt on

contribution, exempt on gain and exempt on
maturity) tax benefit.
BACKGROUND

In 1999 the [Link] a national

project, OASIS (old age social and income
security) to examine policies related to old
age income security. Based on the
recommendations of the OASIS report, the
Govt introduced a new Defined Contribution
Pension System for the new entrants to
Central/State Government service,
except to the Defence forces i.e. Army, Navy
and Air Force, replacing the existing system
of the Defined Benefit Pension System.
NPS started with the decision to stop
defined benefit pensions for all its
employees who joined after 01/01/2004.

It was designed for government employees

only, but opened up for all citizens in 2009.

On 23/08/2003 PFRDA was established &

The PFRDA Act was passed on 19/09/2013
and notified on 01/02/2014.
 Eligibility:

Unique NPS Account may be opened voluntarily

by every citizen of the country, whether resident or
non resident, subject to the following conditions:
a) Age between 18 - 65
b)KYC Compliance

Citizens with following disabilities may not open

the NPS Account :
Un-discharged insolvent
Persons with unsound mind
All citizens have only one NPS Account through
their life.
Features of NPS

A. Voluntary Scheme: It is a voluntary scheme

open to every citizen between age group of 18-65
year working in the private unorganized sector.

B. Portability: The citizens may operate account

from anywhere in India through vast networks of
PoPs.

C. Independence: The scheme enables the citizens

to be independent even after getting retirement.
D. Safe Investment: A safe retirement fund
Introduced by the Government of India and
regulated by Pension Fund Regulatory &
Development Authority.

E. Low cost scheme: One of the most

important features of the product is that it
can manage automated asset allocation for
each individual account separately by starting
with a higher allocation to equities and
gradually shifting away to fixed income as one
gets older.
F. Flexibility:

The scheme provides flexibility to the citizens

to park their excess fund temporarily in the
scheme through the Tier II account.

The scheme gives flexibility to the citizens to

continue their account with as low investment
as Rs 500/- at one time and Rs 1000/- per
annum.

The scheme gives flexibility to select the fund

manager and monitor the performance.
Where does National Pension System (NPS)
invest your money?
 Savings are pooled into a pension fund
Invested by PFRDA-regulated professional
fund managers
As per the approved investment guidelines
into diversified portfolios
Comprising govt bonds, bills, corporate
debentures and shares.
contributions would grow and accumulate
over the years, depending on the returns
earned on the investment made.
 Benefits of NPS

A. Returns/Interest

A portion of the NPS goes to equities(this may

not offer guaranteed returns).This scheme
has delivered 8% to 10% annualized returns
over decades.

However, it offers returns that are much

higher than other traditional tax-saving
investments like the PPF.
B. Option to change the Scheme or Fund
Manager
Provision to change the pension scheme or
the fund manager if you are not happy with
their performance. This option is available for
both tier I and tier II accounts.
 C. Risk Assessment/ Equity Allocation Rule

There is a 75% cap on [Link] rule comes

with three riders:

i) applies only to the non-government subscribers

ii) At the age of 50, the equity portion will taper off
according to schedule fixed by PFRDA.

The equity allocation reduces by 2.5%/year till it

reaches 50% by the age of 60.

iii) If joined beyond 50 years of age, then as per the

table, the maximum cap will start accordingly.
 D. Tax efficiency

Deduction of up to Rs. 1.5 lakhs can be claimed

for both contribution [Link] employer. & By you.

80CCD(1). Upto 10% of salary for salaried OR

Upto 20% of gross income for self
employed

80CCD(1B) additional self contribution upto Rs.

50,000.

The scheme, therefore, allows a tax deduction of

up to Rs. 2 lakh in total.
Investment in NPS Account:
It provides the subscriber ease and flexibility
to invest as per wishes as pension as well as
investment under following types of accounts :

Tier 1 Account
PFRDA started the scheme with Tier 1
Account as the Pension Account. The
investments made in the account are subject
to withdrawal after attaining the age of 60.
Subscriber is required to invest at least Rs
1000 per annum in the Tier 1 Account.
 Tier 2 Account:

To encourage additional retirement savings.

Tier I a/c required
No tax benefits
No lock-in.
Withdrawal at any time.

In functionality, both Tier I and Tier II are

similar and so is the fund management costs
as well as choice of investments.
Fund options:

Subscribers gets the option to invest under

following asset classes as per their choice
and risk appetite :
Equity (Asset Class E)
Corporate Bonds (Asset Class C)
Government Securities (Asset Class G)
Alternative Investment funds (Asset class A)

Subscriber has the flexibility to switch the

asset allocation as per his wishes once in a
financial year.
Investment Options:

A) Active Choice

subscriber can select the asset allocation

among Equity, Corporate Bonds and Govt
Securities as per his choice.

The earning potential of the NPS is higher as

compared to other fixed income schemes.

E: Equity ,C: Corporate Debt, G: Govt Securities,

A: Alternate Investments.
B. Auto Choice

Funds invested across three asset classes

is allocated by a pre – defined formula
based on the age of the Subscriber.

The Auto choice is also known as Life

Cycle Fund option Life Cycle Fund (LC-25),
Life Cycle Fund (LC-50), Life Cycle Fund
(LC-75).
 Withdrawal Rules After 60

cannot withdraw the entire corpus.

compulsorily required to keep aside 40% to

receive a regular pension from PFRDA registered
insurance firm.

Of the remaining 60%, 40% is tax-free & 20% will

be taxed as per tax slab.

100% Withdrawal if the total accumulate corpus

is less than Rs. 2,00,000.
Early Withdrawal

It is important to continue investing till 60

But investing for at least 3 years, one may
withdraw up to 25% for certain purposes
children’s wedding/higher studies building
/buying a house or medical treatment of
self/family, among others.

withdrawal for up to 3 times allowed with a

gap of 5 years in the entire tenure. These
restrictions are only imposed on tier I
accounts and not on tier II accounts.
Exit rules

BEFORE 60, 80% of the accumulated pension

wealth to be utilized for purchase of annuity &
balance is paid as a lump sum.

100% Withdrawal, if the total accumulated

corpus is less than Rs. 1 Lakh.

However, you can exit from NPS only after

completion of 10 years.
Death of the subscriber:

The 100% accumulated pension wealth would

be paid to nominee and there would not be
any purchase of annuity/monthly pension.

For handling all types of withdrawal claims

made to CRA, a special NPS Claim Processing
Cell (“NPSCPC”) has been created.
EXIT PLANS AFTER 60:

Subscriber can remain invested Up to age 70 or exit.

Following options are available:

A)Continuation of NPS account:

Subscriber can continue to contribute Up to age 70.
This contribution is also eligible for exclusive tax
benefits.

B) Deferment:
Subscriber can defer only lump sum Withdrawal
defer only Annuity or defer both lump sum & Annuity.
C) Start your Pension:

If Subscriber does not wish to continue/

defer NPS account, he/she can exit from
NPS. He/she can initiate exit request online
and as per NPS exit guidelines start
receiving pension.
How to register for NPS

By visiting POP-SP
Any citizen of India between the age of 18
to 65 can open NPS.

Through eNPS
Subscriber can open NPS account online by
visiting eNPS website through PAN & Bank
details.
The Permanent Retirement Account Number
(PRAN) to every applicant is alloted by
PFRDA on receipt of application form After
confirmation of payment has been made.

PRAN is permanent in nature and unique to

every individual. All funds invested may are
recorded & administered through the
subscribers PRAN ID.
DRAWBACKS OF NPS
1. Long term Investment:
If started at age 30. We have to contribute till age
[Link] we live till 90, it will be 30 years of post-
retirement association. The time period may
stretch very longer.

2. Corpus is only partially tax-free:

According to the current income tax rules, annuity
or pension is taxable in the year of receipt. The
amount of pension received will get added to one’s
income and taxed as per one’s income tax slab.
3. Maximum equity allocation of 75%:
As one age, the allocation to equities taper off. If
you wish to allocate higher percentage into equity
for long term, act accordingly.

4. Pension is compulsory:
Being a retirement focused scheme, The pension
will be paid by the life insurer depending on which
pension option one chooses.

The pension that one gets from the Immediate

Annuity scheme of the life insurer is generally
around 6 percent and as it is subject to tax.
Returns may change and may be revised
depending on interest rate prevailing in the
economy. However, pension once fixed will
continue till lifetime.

5. Passive investment approach:

It is more of an passive approach and the
pension fund managers have to replicate the
index in fund management. While active
fund management has the potential to
outperform the index.
 NPS Corporate Model
launched in December 2011.
like a Provident Fund in which employer &
employee can build employees' pension wealth.
available for public and private sector employees
a win-win proposition for both.

Under Corporate NPS models, investment upto10%

of basic salary + D.A is deductible from taxable
income. This is over and above the benefit of Rs
1.5L u/s 80 C, which is applicable to the
employee's contribution.
Even the employer can claim tax benefit for
contribution by showing it as business
expense in the profit and loss account.

Corporate NPS can be offered along with

Provident Fund, Gratuity, Superannuation or
any other Pension Schemes offered by the
employer.
NPS-Lite
National Pension System-Swavalamban - known
as NPS-Lite- It is focused on economically
disadvantaged individual. PFRDA has appointed
NSDL e-Governance Infrastructure as CRA for NPS-
Lite pension scheme.

It can be started with a minimum investment of Rs

100. Though there is no lower limit set for
contributions per year, it is recommended that a
contribution of at least Rs 1,000 per year is made
to ensure a reasonable pension after retirement.
A higher contribution amount will yield
higher pension and since the benefit is
available for contribution up to Rs12,000,
it may be desirable to save higher
amounts in your NPS-Swavalamban
account.
THANK YOU

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