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NPS offers bundles of features to subscribers which make it a unique investment option for the subscribers. Some of the features are mentioned below:
Prudently regulated by PFRDA
Portable across jobs and geographies
Extremely low cost of investment
Choice of funds, fund managers
and investment options
Tax benefit on Tier I contributions
Unmatched investment freedom
Easy accessibility of account details
No TDS deducted on withdrawal amount
Issuance of PRAN card
National Pension System (NPS) is an investment cum pension scheme initiated by Government of India to provide old age security and pension of all citizen of India. The NPS was rolled out for all citizens of India on May 01, 2009. The Scheme is regulated by Pension Fund Regulatory and Development Authority (PFRDA).
Who Can Join
PRA gives access to two types of NPS accounts to Subscribers :
Tier II account can be opened along with Tier I account or at a later point of time.
|Particulars||Tier I||Tier II|
|Minimum Contribution required at the time of Account opening||Rs. 500||Rs. 1000|
|Minimum Subsequent Contribution Amount required||Rs. 500||Rs. 250|
|Minimum Contribution required per year||Rs. 1000||NIL|
|Minimum number of contribution required in a year||1||NIL|
Minimum balance in Tier- II at the end of Financial year is Rs 2000/-
NPS gives Subscribers an option to invest according to their own choice and risk appetite among three funds also known as Asset Classes:
|C||Fixed Income Instruments other than Govt. Securities|
|AIF||Alternate Investment Funds|
Maximum exposure to Equity Fund (E) is restricted to 50% of corpus amount. However, subscribers can invest 100% of their corpus to Corporate Bonds or Government Securities Fund. It offers subscribers two scheme preferences also known as Investment Options:
Life Cycle Fund: Pre-defined Investment Pattern
The Auto choice comes with 3 options of Investment, depending on the maximum Equity exposure
a. Aggressive LC75- Equity upto 75%
b. Moderate- LC50- Equity upto 50%
c. Conservative LC25- Equity upto 25%
|Percentage Allocation to different Asset Classes||Moderate Life Cycle Fund
|Aggressive Life Cycle Fund
|Conservative Life Cycle Fund
( E )
( C )
( G )
( E )
( C )
( G )
( E )
( C )
( G )
|Upto 35 years||50%||25%||25%||75%||10%||15%||25%||45%||30%|
|55 and beyond||10%||45%||45%||15%||10%||75%||5%||5%||90%|
As a unique feature, subscribers get an option to select a fund manager to manage their investment portfolio. Currently, 8 fund managers are registered with PFRDA to manage the investment portfolio of NPS Subscribers.
Vesting from Tier I Account
|Particulars||Before the age 60 / Superannuation date as per service rules||At the age 60 / Superannuation date as per service rules|
|Minimum Amount required to buy Annuity||80% of Pension Wealth||40% of Pension Wealth|
|Withdrawal of Balance Amount||Only in one Lump sum immediately, no deferment allowed||In upto10 annual instalments till 70 years of age.
Lump sum at any point of time before attaining the age of 70 years.
Withdrawal can be deferred up to 70 years of age* -
|When would Annuity start||Annuity will start immediately irrespective of age of the subscriber at the time of withdrawal||Annuity will start immediately after it is purchased.
Purchase of annuity can be made immediately on retirement
Deferred by up to 3 years from retirement date*
|Contribution beyond 60 years / superannuation age||Not available||Allowed till 70 years of age*, Normal rules of account operation will continue to apply till exit of the subscriber from NPS. There will be no option for the deferment of the annuity purchase or deferment of withdrawal under this option which can be done anytime.|
|What happens to PRAN||PRAN will be closed.||PRAN will be closed.|
|What happens if Tier II account is also there||Amount available in Tier II account will be credited to Subscriber's Bank account automatically and Tier II account will also be closed.||Amount available in Tier II account will be credited to Subscriber's Bank account automatically and Tier II account will also be closed.|
* Request needs to be given in Central Recordkeeping Agency (CRA) system latest 15 days before retirement date.
Withdrawal / Exit from NPS: Subscribers can now initiate the withdrawal of their funds from NPS online on CRA-NSDL portal.
Annuity Services: On retirement, Subscriber can select any of the PFRDA registered Life Insurance Companies to offer Annuity Plans. Below is the list of Life Insurance companies registered with PFRDA to provide annuity services
Intermediaries in NPS Architecture
In order to promote NPS in corporate sector, NPS Corporate Sector model was launched by the regulator in December, 2011. It is based on the concept of Employer-Employee relationship.
Under the NPS Corporate Sector model, the employee as well as the employer, can contribute to Tier I NPS account of the employee as mentioned below:
Tax Benefit on Tier-1 Contribution
An employee can join NPS through Corporate Sector model only if his/her employer is registered for the same. In order to know more about NPS Corporate Sector Model, please write to firstname.lastname@example.org
Get T-PIN from CRA. By using this T-PIN, subscribers can call on CRA call centre number to access their account details.
|Intermediary||Nature of Service||Applicable Charge*||Frequency of charge||Mode of deduction|
|POP (Maximum Permissible Charges)||Subscriber Registration||Rs. 200||One time||Deducted from initial contribution|
|Contribution Processing||0.25% of contribution amount subject to minimumRs. 20 and maximum Rs. 25000 per transaction||On each contribution||Deducted from Contribution amount|
|Non - Financial Transaction Processing||Rs. 20||On each request||Collecting upfront along with service request|
|Persistency||Rs 50/- per annum
( only for NPS- All citizen model)
|Per Annum||Through cancellation of units|
|CRA||Permanent Retirement Account Opening||Rs. 40||One time||Through cancellation of units|
|Permanent Retirement Account Maintenance||Rs. 90||Per Annum|
|Transaction Processing||Rs. 3.75||On each transaction|
|NPS Trust||Scheme expenses||0.005% of the total accumulated corpus (AUM)||Annually||Through cancellation of units|
|Pension Fund Manager||Investment Management||0.01% p.a.||On Annually||Through NAV deduction|
|Custodian||Asset Servicing||0.0032% p.a.||On Annually|
|*exclusive of Service Tax|
|Service tax and other levies, as applicable, will be levied as per the existing tax laws. There are no additional CRA charges for the maintenance of Tier - II account. Also, please note that the fee structure may change from time to time as may be decided by PFRDA.|
Subscribers can apply for NPS through the below mentioned routes:
|ID Proof||Address proof|
Existing Kotak Bank customers can subscribe to NPS by simply logging on to Kotak Net Bank Website and fill up the online application form to enrol for the NPS Scheme.
NPS offers 4 fund choices to subscribers:
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