National Pension System (NPS)
Overview:-
National Pension System (NPS) is a pension cum investment scheme launched by Government of India for central government staffs in the year 2004. The Central Government has made the National Pension System (NPS) to be available to all citizens of India from May 01, 2009. National Pension System (NPS), regulated by Pension Fund Regulatory and Development Authority (PFRDA), is an important milestone in the development of a sustainable and efficient voluntary defined contribution pension system in India.
National Pension System (NPS) is to facilitate a regular adequate retirement income to all Citizens of India during old age. It brings an attractive long term saving avenue to plan your post retirement life effectively through safe and regulated market-based return.
Objectives:-
- To turn our Pension less society into Pensioned society.
- To provide reasonable returns for their long term contributions.
- To lead a dignified life after retirement through pension.
- To extend the old age security coverage to all citizens of India.
How NPS Works:-
An individual has to subscribe NPS account through the authorized Point of Presence (Bank) and remit the subscription regularly.
The remitted contribution amount will be pooled in a pension fund.
These funds are being invested by PFRDA regulated professional Fund Managers as per the approved investment guidelines in the diversified portfolios comprising of Equity (Shares), Government Bonds, Bills, Corporate Debentures, etc.
These contributions would grow and accumulate over the years and the returns will be earned according to the investment made.
At the time of a normal exit from NPS, the subscribers may use the accumulated Pension Wealth under the scheme either to purchase a life annuity from a PFRDA empanelled life insurance company or withdraw a part amount of the accumulated pension wealth as lump-sum, if they choose to do so.
Tamilnad Mercantile Bank Ltd., was appointed by PFRDA to act as one of the Point of Presence (POP) for the NPS. Presently, all our branches are designated to carry out the NPS activities as Point of Presence- Service Providers (POP-SP).
National Pension System Scheme Eligibility:-
All citizens age from 18 years to 70 years of age.
NPS Tax Benefit:-
As per the amendment made in the Union Budget 2015 in Tax Provisions for FY 2015-16, if any customer contributes voluntarily in Tier I of the NPS scheme, then he would get an additional Tax 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.
A subscriber who is eligible for Tax benefit upto ₹ 2,00,000/- and he/ she wants to invest in NPS only, also can get Tax benefit of his/ her full extent i.e., under Section 80CCD (IB)- Rs.50000/- and 80CCE- Rs.150000/-
Flexibility:-
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. Any individual can switch over from one investment option to another option or one fund manager to another fund manager subject to the certain regulatory restrictions. The returns are totally market based and the subscriber has the flexibility to choose any of the following Fund Managers:
- LIC Pension Fund Limited.
- SBI Pension Funds Private Limited.
- UTI Retirement Solutions Limited.
- ICICI Prudential Pension Funds Management Company Limited.
- Kotak Mahindra Pension Fund Limited.
- HDFC Pension Management Company Limited.
- Aditya Birla Sun life Pension Management Limited
- TATA Pension Management Limited
- Max Life Pension Fund Management Limited.
- Axis Pension Fund Management Limited.
Investment option:
NPS offers the following two options to invest the subscriber’s investment. The subscriber should choose any one of the choice for distribution of their contribution.
- 1.Active choice:
The subscriber can select this option as to how his contribution can be invested. If active choice is selected, the subscriber must indicate the percentage distribution between corporate, Government and equity. The maximum investment allowed in equity is under Tier - I is 75% and Tier - II is 100% without any conditions of tapering from the age of 51 years.
- 2.Auto choice:
If the subscriber does not have financial knowledge or subscribers who are unable / unwilling to exercise any choice of investment, the contribution will be made as per the pre-defined portfolio.
Types of NPS account
The scheme 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 :
- Voluntary savings facility.
- Tier II account can be opened only after PRAN allotment for Tier I account.
- Subscriber will be free to deposit and withdraw his/her savings in the Tier-II account.
KYC documents required to open NPS:-
- Permanent Address Proof (any one as mentioned in the Registration form)
- Communication Address Proof (any one as mentioned in the Registration form)
- Cancelled Cheque Leaf / Bank Certificate issued by branch.
- PANCARD copy.
Details of minimum contribution and charges:-
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Particulars
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Tier 1
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Tier 2
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Account opening charge
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Rs.400/-.
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Rs.400/-.
|
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Initial and All Subsequent Contributions
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0.50% of contribution
(subject to Min.Rs.30/- and Max.Rs.25,000/-)
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0.50% of contribution
(subject to Min.Rs.30/- and Max.Rs.25,000/-)
|
|
All Non-Financial Transaction
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Rs.30/-
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Rs.30/-
|
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e-NPS(for subsequent contribution)
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0.20% of contribution, subject to Min.Rs.15/- and Max. Rs.10,000/-.
(Only for NPS All Citizen and Tier – II Accounts)
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0.20% of contribution, subject to Min.Rs.15/- and Max. Rs.10,000/-.
(Only for NPS All Citizen and Tier – II Accounts)
|
|
Processing of Exit / Withdrawal
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0.125% of corpus with min.Rs.125/- and Max. Rs.500/-
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N.A.
|
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GST is applicable for all the Charges.
|
|
Minimum contribution to open A/c
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Rs. 500/-
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Rs. 1,000/-
|
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Minimum contribution in financial year
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Rs. 1,000/-
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N.A.
|
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Minimum amount per contribution
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Rs. 500/-
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Rs. 250/-
|
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AMC Protean (p.a.)
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Rs. 69/-
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Nil
|
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Fund Management Fee (p.a.)
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0.09% of AUM
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0.09% of AUM
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Contribution Details:-
- Once application is processed by Central Record keeping Agency (CRA), subscriber will be allotted with Permanent Retirement Account Number (PRAN). After allotment of PRAN, the subscriber can also contribute through online (by logging into https://cra-nsdl.com/CRA/) or through branch.
Tier – 2 Activation Details:-
- If the subscriber who is having Tier-I account wants to activate Tier 2 account, can activate through online (by logging into https://cra-nsdl.com/CRA/) or through branch.
Modification in details of NPS:-
- If subscriber wants to modify any details like name, father name, nomination, Pension Fund Manager (PFM), etc. should contact their branch and submit the modification application.
- If customer wants to modify the details like Mobile No, E-Mail ID, PRAN reissue, I-Pin/T-Pin request, they can modify either through online by logging into https://cra-nsdl.com/CRA/ or through branch by submitting modification application.
Types of withdrawal in NPS-Tier-1 account :
- a.Normal withdrawal (Superannuation Exit)
- Subscriber should attain 60 years.
- Lumpsum payable Rs.5.00 Lakhs.
- If the corpus is more than Rs.5 lakhs, at least 40% of the accumulated pension wealth of the subscriber should be utilized for the purchase of an Annuity and the balance 60% will be paid as lump sum.
- b.Premature Exit:
- Be a subscriber for 5 years.
- Lump sum payable if the corpus is less than or equal to Rs.2.5 lakh at the time of Exit.
- If the corpus is more than Rs.2.5 lakh, at least 80% of the accumulated pension wealth of the Subscriber should be utilized for purchase of an Annuity and the balance 20% will be paid as lump sum.
- c.Exit due to Death:
The entire accumulated pension wealth of the subscriber will be paid to the nominee or legal heirs. If the nominee/legal heir wishes to opt for annuity (pension), they are required to select Annuity Service Provider (ASP) and annuity scheme in Death Withdrawal Form (Subject to PFRDA guidelines from time to time).
- d.Condtional Withdrawal:
- The subscribers will be allowed to withdraw up to 25% on their own contributions in three occasions during the entire tenure of subscription.
- First conditional withdrawal will be allowed after completion of 3 years in NPS and subsequent withdrawal will be allowed after completion of 5 years from the previous withdrawal.
The conditions for subscribers joining NPS beyond the age of 60 years:
- They can continue or defer their NPS Account up to the age of 75 years.
- Those subscribers who have closed their NPS account earlier are also permitted to open a new NPS account as per increased age eligibility norms.
- Normal Exit will be after completion of 3 years ( as per the norms mentioned point - a)
- Exit before completion of 3 years shall be treated as Premature Exit ( as per the norms mentioned in point - b).
- In case of unfortunate death of the subscriber, the entire corpus will be paid to nominee of the subscriber as lump sum. If the nominee/legal heir wishes to opt for annuity (pension), they are required to select Annuity Service Provider (ASP) and annuity scheme in Death Withdrawal Form (Subject to PFRDA guidelines from time to time).