Planning for your retirement is one of the most important things to do in these days and for this purpose investing your savings in the National Pension Scheme is the best option to choose from. The National Pension Scheme is a retirement benefit plan promoted by the Government of India. It is low-cost, tax-efficient and flexible retirement savings scheme launched by the Government. The scheme provides a lot of benefits and investment options to the employees.
The National Pension Scheme was launched on 1st January 2004. Earlier this scheme was only applicable for the Central Government Employees only but later in the year 2009, it was allowed from the age limit of 18 years to 60 years. Under the NPS, your savings will be invested in a pension fund by Pension Regulatory and Development Authority (PFRDA).
The NPS has two types of accounts
- Tier-1 Account which is compulsory for every subscriber. In this account, you cannot premature you withdraw money before the age of retirement.
- Tier-2 Account, which is optional in nature. You can open a Tier-2 Account if you have opened Tier-1 account first. In this account, you can premature the withdraw money before the age of the retirement.
- 1 Pension Fund Regulatory and Development Authority (PFRDA)
- 2 Eligibility Criteria for National Pension Scheme
- 3 Interests Rates Offered by the National Pension Scheme
- 4 Features of National Pension Scheme
- 5 Advantages of the NPS Scheme
- 6 Charges Levied by POPs and CRAs
- 7 Procedure to Check Balance in National Pension Scheme Statement Online
- 8 Rules Regarding the Withdrawals from the National Pension Scheme
- 9 Premature Withdrawal from NPS for both Tier-I and Tier-II Accounts
- 10 Procedure and Documentation required to make Withdrawals from the NPS
- 11 National Pension Scheme Withdrawal Form Types
- 12 Death Benefits Provided Under the National Pension Scheme
- 13 Swavalamban Pension Yojana or NPS-Lite
- 14 Comparison between the New Pension Scheme and the National Pension Scheme – Highlights
The Pension Fund Regulatory and Development Authority which is otherwise called as the PFRDA is an independent organizing body that is established by the Indian Government to regulate and oversee the pension funds in India.
The main objective of this regulatory body is to encourage the citizens to secure themselves financially by securing the subscriber’s pension funds as well as their interests. It also ensures that the NPS is administered as per the rules and the provisions that are laid down in PFRDA Act.
Eligibility Criteria for National Pension Scheme
The eligibility criteria for the National Pension Scheme is:
- All the citizens must have an Indian Nationality.
- They should be under the age criteria of 18-60 years.
- The Non- Indian Residents can also join if they have their bank accounts in India.
A person who is declared insolvent and has an unsound mind is not eligible for the National Pension Scheme.
When you subscribe to the New Pension Scheme, you are given a unique account number which is called as PRAN which s otherwise called as the Permanent Retirement Account Number.
Interests Rates Offered by the National Pension Scheme
The NPS does not provide any particular interest rate. However, the NPS schemes can earn a subscriber anywhere between 12%-14% interest which is quite high, while taking any investment options into consideration.
Features of National Pension Scheme
The various features of National Pension Scheme
- Since it is a low investment option, it, therefore, offers a transparency to the subscriber. The subscribers can freely choose their own pension fund schemes, where they can have an idea of how the investment is doing on a routine basis.
- The process is very simple, as the account is opened at the respective Nodal Office and acquire a PRAN.
- As the employees are provided with unique PRAN’s, therefore, they are recognized by the same PRAN all over the country, no matter they stay in which part of India.
- The subscribers can access to the details pertaining to the NPS Online.
- The NPS offers a wide variety of options to choose from, which includes Pension Fund Managers.
- They also provide the flexibility to switch between the fund managers and investment options.
- The subscriber is free to change the contribution amount and contribution frequency at any point in time.
- It is a low-cost investment option with low management fund charges.
Advantages of the NPS Scheme
- The NPS offers a wide range of investment options and choice of Pension Fund Managers. This will lead to the growth of the investments and the individuals have the choice to switch over to any investment option they want.
- The NPS provides effortless portability across the jobs and locations.
- It provides Dual Benefit of low cost and power compounding. The account maintenance cost is inexpensive compared to the other pension products available in India.
- It is a safe retirement fund introduced by the Government of India and regulated by PFRDA.
- Tax Benefits under the NPS Scheme:
- Section 80C Deduction: Your Contribution is eligible for the deduction under the Section 80C up to a maximum limit of Rs 1.5 Lakh.
- Additional Rs 50, 000 benefit under Section 80CCD (1B): There is an additional deduction of Rs 50, 000 available for the financial year 2015-16 under the Section 80CCD (1B). This means that you can claim up to Rs 1.5 Lakhs and an additional benefit of Rs 50, 000.
Charges Levied by POPs and CRAs
- In case of the Tier-I accounts, the employer has to pay all the fees and charges and in case of the Tier-II accounts, the subscriber has to pay for all the transactional and activational charges.
- The CRA (Centralized Record Keeping Agency) levies the following fees and charges:
- PRA account opening charges are Rs 50.
- PRA account maintenance charges are Rs 190 per year. The transaction fees are Rs 4 per transaction.
- The POP levies the following fees and charges:
- The registration fees cost Rs 100. 0.25% of the initial amount is contributed by the subscriber for the contribution upload as well as any transactions related to the contribution uploads.
- If any transaction is made where the contribution is not made by the subscriber- Rs20.
- These fees are chargeable from the date of joining.
Procedure to Check Balance in National Pension Scheme Statement Online
Following are the step by step procedure to check balance in Tier-I and Tier-II accounts in the National Pension Scheme Statement Online:
- Firstly, open the main website of the CRA and NSDL, via the following link: http://cra-nsdl.com/CRA/
- Log in as the subscriber to access the balance details under the NPS.
- Now login using your User ID and password which is the PRAN number allocated by the NSDL to each individual subscriber.
- Following the login procedure, go to the “Views” tab shown under that particular transaction statement.
- This will provide all the details regarding where the money is invested as well as the fund managers appointed to manage his investments.
- The subscribers can also check the aggregate amount that has been invested by both himself as well as the Government, including any returns.
- Tier-II balance details can be accessed by heading to the “Account details” section which is shown at the bottom.
Rules Regarding the Withdrawals from the National Pension Scheme
Withdrawal from the NPS is allowed by the PFRDA only under the following conditions:
- If 40% of the accumulated pension of the subscriber is used for the purchase of the annuities, then the remaining accumulated pension is given to the subscriber in the form of the lump sum.
- In case of the death event of the subscriber, the total pension that the subscriber has accumulated will be given to the nominee.
- If a minimum of 40% of the accumulated pension of the subscriber is used for the purchase of the annuities then the remaining amount will be given to the subscriber in the form of the lump sum.
The main rules regarding the withdrawals from both Tier-I and Tier-II Accounts are:
Withdrawal from Tier-I Accounts
If the subscriber should complete the service within 15 years, then he/she is eligible to make withdrawals before maturity. If the subscriber completes the service of 25 years, then he/she can make withdrawals up to 50% of his/her contribution. These withdrawals are made in emergency cases only.
Withdrawal from Tier-II Accounts
There are no restrictions regarding the withdrawals on the Tier-II accounts. The subscribers are free to make withdrawals whenever and wherever they want to.
Premature Withdrawal from NPS for both Tier-I and Tier-II Accounts
There are a number of rules and regulations regarding the premature withdrawal from NPS for both Tier-I and Tier-II accounts are concerned:
- The subscriber is allowed to make partial withdrawal about a maximum of 25% of the contribution.
- Only three premature withdrawals are allowed per subscriber.
- To be eligible for the premature withdrawals, the subscriber must have made a contribution towards NPS for at least 10 years.
- In an emergency case, such as sickness or any health related issues premature withdrawals are allowed for the treatment expense.
- The premature withdrawals can also be applicable for the education and marital expenses.
- If the subscriber is buying a new house for the first time, then he/she can use the premature withdrawals.
Procedure and Documentation required to make Withdrawals from the NPS
If a subscriber wants to stop making the contributions to the NPS, then he/she has filled in the withdrawal application form and submit to his or her respective Point of Presence.
Following are the documents that are required to make withdrawals from the NPS:
- Original PAN Card
- Identity Proof such as Passport, PAN Card, Driver’s License etc.
- Address Proof such as Passport, Voter ID, Aadhaar Card etc.
- Bank certificates or the cancelled cheque that contain the name of the subscriber as well as his bank account number with the IFSC Code(check IFSC code here).
All the documents are authenticated and the Point of Presence (POP) will send them to the CRA and NSDL. The CRA ensures that the claim is registered and all the documents and forms are submitted.
Later the CRA will ensure that the application is processed and the account is settled.
National Pension Scheme Withdrawal Form Types
The National Pension Scheme Withdrawal Forms are categorized into three types:
- Employees of the Government
- Subscribers belonging to the Government
- Swavalamban or unorganized sector subscribers
Withdrawal Forms for the Government Employees
Form 101GS: The Government employees can avail this form to withdraw the accumulated pension following their retirement.
Form 102 GP: The Government service employees can avail this form to withdraw their accumulated pension before their time of retirement.
Form 103 GD: The Nominee or any legal heir of an employee with the Government who is the part of the NPS can avail this form in order to claim the pension that is accumulated in the account of the subscriber.
Withdrawal Forms for the Corporate Subscribers
Form 301: The corporate employees, as well as the individuals who opt for the withdrawal of their total accumulated pension following retirement, can use this form.
Form 302: The corporate employees, as well as the other individuals and the citizens, can opt for the withdrawal of the accumulated pension before the retirement can use this form.
Form 303: The Nominees or any legal heir of a corporate employee can avail this form to claim this accumulated pension of the subscriber.
Withdrawal Forms for the Swavalamban Subscribers
Form 501: If the subscriber is a part of the Swavalamban, then he/she can use this form to make the withdrawals of their total accumulated pension following their retirement.
Form 502: If any subscriber is a part of the Swavalamban then, he/she can use this form to make withdrawals of the total accumulated pension after the retirement.
Form 503: If any Nominee of the person who is the part of the Swavalamban can use this form to claim the accumulated pension of the subscriber.
Death Benefits Provided Under the National Pension Scheme
According to the guidelines of the National Pension Scheme, the nominee of the subscriber is allowed to withdraw, as a lump sum, if the total amount that is accumulated in the account of the subscriber in case of the death event of the subscriber.
The following documents are required as the Nominee, to make the withdrawal from the subscriber’s account.
- The relevant form that is related to the withdrawal of the amount.
- The PRAN Card in original
- A cancelled cheque showing the relevant details of the Nominee like the bank accounts with IFSC Codes
- The Subscriber’s death certificate.
- Any document or the certificate that proves the claiming the amount is the legal nominee or heir of the subscriber.
- The ID as well as the Proof of Address of the Nominee.
NPS Scheme has one additional account which is called as the Swavalamban Account.
Swavalamban Account: In this account, the Indian Government deposits a sum of Rs 1000 every year over the initial four years. The aim of introducing this account is to provide an encouragement for the workers and the low-income groups.
Swavalamban Pension Yojana or NPS-Lite
The main objective of this Yojana is to help the people who are financially and economically backwards. These schemes aim is to secure their future. The NPS-Lite scheme is based on the servicing of the groups as a whole and on low charges. The organizations called as the “Aggregator’s” will take the charge of the people who belong to these particular groups and provide them assistance with the process of registration, transfers, maintenance of the Pension contributions. The subscribers aged between 18-60 years can join and make contributions.
According to the scheme, the Government deposits a fund amount of Rs 1000 to each individual’s NPS account for the initial four years after the opening of the account in the year 2010-11. Currently, the Atal Pension Yojana has replaced this scheme where any subscriber whose age is less than 40 years is eligible to receive a pension amount up to Rs 5000, once he/she attains an age of 60 years.
Features of Swavalamban Pension Yojana or NPS Lite
- A PRAN card is allotted to every subscriber who comes under this scheme.
- The contributions are made monthly, of any amount.
- As per the Guidelines set by the Government, 85% of funds are invested in the debt securities and 15% of the funds are invested in the equity.
- The fund managers of this scheme are ICICI, Kotak, IDFC, SBI, Reliance, and UTI. The subscriber can choose any one of these.
- The aggregators will receive the account statements, that is the history of all the transactions that take place and this transaction statement is later distributed to the subscribers in monthly basis.
Comparison between the New Pension Scheme and the National Pension Scheme – Highlights
|Features||National Pension Scheme||New Pension Scheme|
Contribution By Employees
|The individual has to contribute 10% of his/her total Special Pay, Basic Pay and all other allowances that combine to make up Provident Fund.||Includes all the allowances that is mentioned is the National Pension Scheme along with Dearness Allowance.|
Contribution by the Bank
|The Bank’s contribution will match the contribution of the employee, a separate account is created under the NPS to collect the funds.||In new pension scheme, the contribution of both the parties is collected in one account.|
Employee’s Additional Contribution
|The Contributions made under the National Pension Scheme can be stopped by the employees by sending an advance notification before a month.|| |
This scheme allows withdrawals and schemes at any point in time.
Management of Funds
This scheme was managed by the Provident Fund Scheme
|The PFRDA appoints six fund managers to control and manage the account.|
Scope of Regulation
No such body exists at the Nationwide Level
|PFRDA is the authorized body for this scheme.|
Levy of Charges
|No extra fees are charged to the subscribers||Some fixed and variable charges are levied under the New Pension Scheme.|