National Pension System (NPS)

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NPS, regulated by PFRDA, is an important milestone in the development of a sustainable and efficient voluntary defined contribution pension system in India. National Pension System has been made available to all citizens of India from 01st May 2009.

NPS is a low cost portable pension system. There are multiple Fund Managers and investment options available under this system. The investors have an option to select fund manager and also select investment options.

Under NPS the investor has access to two types of accounts

Tier 1 : The investor contributes his / her savings for retirement. Hence no withdrawal facility is available from this account. This account is available to all citizens of India from 01st May 2009, other than Government employees already covered under NPS.

Tier II : This is a voluntary savings facility account. The investor is allowed to withdraw his / her savings as per his / her wish, subject to minimum balance requirements. This facility is available to all citizens of India from 01st Dec 2009. An active Tier I account is a pre-requisite for opening a Tier II account.

Key Features

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PRAN : Investors will be allotted an unique Permanent Retirement Account Number (PRAN), which will be the primary means of identifying and operating the account. The invsetor accounts will be maintained by Central Record keeping Agency (CRA). Currently National Securities Depository Limited is acting as the CRA for NPS

Investment Options: NPS contributions are invested as per the investors choices. NPS offers six pension fund managers and three investment options to choose from. In case an investor does not exercise a choice as regards the asset allocation, then the contributions are invested as per the “Auto Choice” option. In both the above choices, investor should necessarily choose any one of the Pension Fund Manager's (PFM’s) appointed by PFRDA.

Tax Treatment: Tax benefits would be applicable as per the Income Tax Act, 1961, as amended from time to time, NPS does not attract any Security Transaction Tax (STT) and Dividend Distribution Tax (DDT).

Tier 1 : The investor contributes his / her savings for retirement. Hence no withdrawal facility is available from this account. This account is available to all citizens of India from 01st May 2009, other than Government employees already covered under NPS.

Benefits at a low cost: NPS offers Indian citizens a low cost option for planning their retirement. A 0.0009% p.a. management fee on the assets under management for managing the investor wealth, makes it one of the lowest cost money mangers. Other charges that are levied on the investors are – CRA, custodian, Trustee Bank charges etc.

Key Stakeholders

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Points of Presence (POP): Points of presence (POP) are the first points of interaction of the NPS subscriber with the NPS architecture. The authorized branches of a POP, called Point of Presence Service Providers (POP-SPs), will act as collection points and extend a number of customer services to NPS subscribers.

Central Recordkeeping Agency (CRA): The recordkeeping, administration and customer service functions for all subscribers of the NPS are being handled by the National Securities Depository Limited (NSDL), which is acting as the Central Record keeper for the NPS.

Pension Funds (PFs) / Pension Fund Mangers (PFMs): The six Pension Funds (PFs) appointed by the PFRDA would manage your retirement savings under the NPS

Trustee Bank: The Trustee Bank appointed under NPS shall facilitate fund transfers across various entitles of the NPS system viz.. PFMs, Annuity Service Provider (ASP), Subscribers etc. Bank of India (BOI) has been appointed as the Trustee Bank. ASPs would be responsible for delivering a regular monthly pension to you after your exit from the NPS

NPS Trust: A Trust, appointed under the Indian Trusts Act, 1882 is responsible for taking care of the funds under the NPS in the best interests of subscribers.

Pension Fund Regulatory and Development Authority (PFRDA): An autonomous body set up by the Government of India to develop and regulate the pension market in India

 


NPS Trust

PFRDA has established the NPS Trust under Indian Trust Act, 1882 and appointed NPS Board of Trustees in whom the administration of the “National Pension System” vests under Indian Law.

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PFRDA

Pension Fund Regulatory and Development

PFRDA was established by Government of India on 23rd August, 2003. The Government has, through an executive order dated 10th October 2003, mandated PFRDA to act as a regulator for the pension sector. The mandate of PFRDA is development and regulation of pension sector in India.

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