NEW PENSION SYSTEM OPENS FOR ALL CITIZENS
New Pension System (NPS) is open for all citizens from 1st May, 2009. Any citizen of India can voluntarily join the NPS. It is based on concept of Mutual Fund. All contributions to NPS are converted to units at NAV on the date of contribution. Pension Fund Regulatory and Development Authority (PFRDA) regulates NPS. The objective of the Scheme is to provided old age security to all citizens as well a reasonable market based return over long term.
NPS was initially established for Government Employees joining Government Services after 1st April, 2004, when Government moved from a defined benefit pension to a defined contribution based pension system by making it mandatory for its new recruits (except armed forces).
For investing in NPS, an Individual has to make a application with Point of Presence–Service Providers *1 of his choice. The applicant will be allotted Permanent Pension Account Number (PRAN). PRAN is like a Demat Account Number. Permanent Pension Account will give details of units held by account holder. To open an account the individual must be of age of 18 to 55 years. Central Recording-keeping Agency (CRA) shall maintain the account of all NPS accounts. NSDL has been appointed as CRA.
Contribution to NPS.
Individuals have to make minimum contribution of Rs.6,000/- per annum towards NPS account. He has to make minimum four contributions during the year. Amount of each contribution should not be less then Rs.500/-. The contribution will be converted into units at declared NAV.
There will be choice of three schemes;
Asset Class A-Investment in predominantly equity market instruments
Asset Class C-Income in fixed income instrument other then government securities
Asset Class G-Investment in Government Securities.
There is also a option of Auto Choice, where contribution will be invested proportionally in above three classes of assets. The proportion will vary depending on the age of subscriber.
Account opening and maintenance charges will be charges by CRA. Processing charges and other charges will also have to be paid to POP, Custodian, Trustee Bank and Pension
Fund Manager (PFM).
Returns: There are no guaranteed returns. Returns will be based on the performance of the Fund. Dividends declared will be reinvested and accumulated in form of additional units. Payments will be in form of Pension starting at Age of 60 years.
Withdrawals: If withdrawals are made at any time before 60 years of age, at least 80% of accumulated pension wealth must be deposited in other IRDA-regulated life insurance company and balance 20% can be withdrawn in lump sum. Between age of 60 years and 70 years 40% of the amount must be annuities and balance can be withdrawn in lump sum or in phased manner during 10 years. At age of 70 years all amount must be compulsory withdrawn. On the death of subscriber, nominee can withdraw 100% of accumulated pension wealth.
Administration of NPS: NPS is regulated by PFRDA. The PFRDA has established a NPS trust under Indian Trust Act, 1882. The Trust is responsible for taking care of Funds. The trust holds account in Bank of India and has appointed Bank of India as Trustee Bank. NSDL is appointed as CRA, which will be in charge of recording keeping, administration and customer service function. All these function will be centralized and performed by CRA. Pension Fund Managers (PFM) will manage retirement saving of subscribers and will invest funds strictly accordance to guidelines issued by government/PFRDA. The following six agencies are appointed as PFM’s; 1. ICICI Prudential Pensions Fund Management Company Ltd, 2. IDFC Pension Fund Management Company Ltd., 3. Kotak Mahindra Pension Fund Ltd., 4. Reliance Capital Pension Fund Limited, 5. SBI Pension Fund Private Limited, 6. UTI Retirement Solutions Ltd.
Point of Presence (POP) will be costumer interface agencies for individuals. They will facilitate opening of account and subscribing to NPS account. PFRDA has appointed 22 banks as POP.
Annuity Service Providers will be appointed to deliver the regular monthly pension to the Subscriber.
New Pension System (NPS) is open for all citizens from 1st May, 2009. Any citizen of India can voluntarily join the NPS. It is based on concept of Mutual Fund. All contributions to NPS are converted to units at NAV on the date of contribution. Pension Fund Regulatory and Development Authority (PFRDA) regulates NPS. The objective of the Scheme is to provided old age security to all citizens as well a reasonable market based return over long term.
NPS was initially established for Government Employees joining Government Services after 1st April, 2004, when Government moved from a defined benefit pension to a defined contribution based pension system by making it mandatory for its new recruits (except armed forces).
For investing in NPS, an Individual has to make a application with Point of Presence–Service Providers *1 of his choice. The applicant will be allotted Permanent Pension Account Number (PRAN). PRAN is like a Demat Account Number. Permanent Pension Account will give details of units held by account holder. To open an account the individual must be of age of 18 to 55 years. Central Recording-keeping Agency (CRA) shall maintain the account of all NPS accounts. NSDL has been appointed as CRA.
Contribution to NPS.
Individuals have to make minimum contribution of Rs.6,000/- per annum towards NPS account. He has to make minimum four contributions during the year. Amount of each contribution should not be less then Rs.500/-. The contribution will be converted into units at declared NAV.
There will be choice of three schemes;
Asset Class A-Investment in predominantly equity market instruments
Asset Class C-Income in fixed income instrument other then government securities
Asset Class G-Investment in Government Securities.
There is also a option of Auto Choice, where contribution will be invested proportionally in above three classes of assets. The proportion will vary depending on the age of subscriber.
Account opening and maintenance charges will be charges by CRA. Processing charges and other charges will also have to be paid to POP, Custodian, Trustee Bank and Pension
Fund Manager (PFM).
Returns: There are no guaranteed returns. Returns will be based on the performance of the Fund. Dividends declared will be reinvested and accumulated in form of additional units. Payments will be in form of Pension starting at Age of 60 years.
Withdrawals: If withdrawals are made at any time before 60 years of age, at least 80% of accumulated pension wealth must be deposited in other IRDA-regulated life insurance company and balance 20% can be withdrawn in lump sum. Between age of 60 years and 70 years 40% of the amount must be annuities and balance can be withdrawn in lump sum or in phased manner during 10 years. At age of 70 years all amount must be compulsory withdrawn. On the death of subscriber, nominee can withdraw 100% of accumulated pension wealth.
Administration of NPS: NPS is regulated by PFRDA. The PFRDA has established a NPS trust under Indian Trust Act, 1882. The Trust is responsible for taking care of Funds. The trust holds account in Bank of India and has appointed Bank of India as Trustee Bank. NSDL is appointed as CRA, which will be in charge of recording keeping, administration and customer service function. All these function will be centralized and performed by CRA. Pension Fund Managers (PFM) will manage retirement saving of subscribers and will invest funds strictly accordance to guidelines issued by government/PFRDA. The following six agencies are appointed as PFM’s; 1. ICICI Prudential Pensions Fund Management Company Ltd, 2. IDFC Pension Fund Management Company Ltd., 3. Kotak Mahindra Pension Fund Ltd., 4. Reliance Capital Pension Fund Limited, 5. SBI Pension Fund Private Limited, 6. UTI Retirement Solutions Ltd.
Point of Presence (POP) will be costumer interface agencies for individuals. They will facilitate opening of account and subscribing to NPS account. PFRDA has appointed 22 banks as POP.
Annuity Service Providers will be appointed to deliver the regular monthly pension to the Subscriber.
Tax Benefit: Subscriber will be entitled to tax-benefit under Section 80CCD of Income-tax Act subject to maximum limit of Rs.1,00,000/- u/s.80CCE i.e. limit of Rs.1,00,000/- includes deduction u/s.80C and 80CCC also. Benefit under New DTC will be available under EET formula.
*1 Names of Point of Serivce Provider
Sr No POP Name
1 Reliance Capital Limited, Mumbai
2 Allahabad Bank, Kolkata
3 IL&FS Securities Services Limited, Mumbai
4 Life Insurance Corporation of India, Mumbai
5 IDBI Bank Ltd, Mumbai
6 State Bank of Indore
7 State Bank of Travancore
8 Union Bank Of India
9 State Bank of India
10 Computer Age Management Services Pvt. Ltd., Chennai
11 Kotak Mahindra Bank Ltd,Mumbai
12 State Bank of Patiala, Patiala
13 Oriental Bank of Commerce, New Delhi
14 UTI Asset Management Company Limited,Mumbai
15 State Bank of Bikaner & Jaipur, Jaipur
16 Axis Bank Limited, Mumbai
17 Central Bank of India, Mumbai
18 State Bank of Mysore, Bangalore
19 ICICI Bank Ltd, Mumbai
20 South Indian Bank Ltd
21 State Bank of Hyderabad
22 Citi Bank NA
1 Reliance Capital Limited, Mumbai
2 Allahabad Bank, Kolkata
3 IL&FS Securities Services Limited, Mumbai
4 Life Insurance Corporation of India, Mumbai
5 IDBI Bank Ltd, Mumbai
6 State Bank of Indore
7 State Bank of Travancore
8 Union Bank Of India
9 State Bank of India
10 Computer Age Management Services Pvt. Ltd., Chennai
11 Kotak Mahindra Bank Ltd,Mumbai
12 State Bank of Patiala, Patiala
13 Oriental Bank of Commerce, New Delhi
14 UTI Asset Management Company Limited,Mumbai
15 State Bank of Bikaner & Jaipur, Jaipur
16 Axis Bank Limited, Mumbai
17 Central Bank of India, Mumbai
18 State Bank of Mysore, Bangalore
19 ICICI Bank Ltd, Mumbai
20 South Indian Bank Ltd
21 State Bank of Hyderabad
22 Citi Bank NA
Attachments
1. List of Point of Purchase Service Providers where NPS account can be opened
http://sites.google.com/site/cakamalg/new-tax-saving-scheme
2. NPS account opening Form.
