Pension plans provide financial security and stability during old age when people do not have a regular source of income.Retirement plan ensures that people live with pride and without compromising on their standard of living during advanced years.
Government of India established Pension Fund Regulatory And Development Authority on 10th October, 2003 to develop and regulate pension sector in the country.
The Government of India has introduced a new Defined Contribution Pension System known as the New Pension System replacing the existing system of Defined Benefit Pension System with effect from 1 January 2004. The GOI decided to roll out the voluntary NPS for all citizen from 1st May 2009. This scheme helps the government of India to reduce the pension liabilities. This scheme gives freedom to individuals to decide where to invest their money.
Since 1 April 2008 , the pension contributions of central government employees covered by the NPS are being invested by professional Pension Fund Managers in line with investment guidelines of government. A majority of state government have also shifted to the NPS.
WHO CAN JOIN?
- Tier 1 account: This NPS account does not allow premature withdrawal and is available to all citizens from 1 May 2009.
- Tier 2 account : This is a voluntary savings facility. This NPS account permits withdrawal prior to the retirement age. Only Tier 2 account can not be opened with out Tier 1 account.
Tier 1 account is mandatory for all government servants joining government service on or after 1 January 2004. In Tier 1 government servants will have to make a contribution of 10% of his pay. The government will make an equal contribution.
In addition to the above pension account, each individual can have a voluntary Tier 2 withdraw-able account at his option. Government will make no contribution into this account.
HOW TO ENROLL IN THE NPS?
- Minimum amount per contribution: Rs.500
- Minimum number of contributions: 1 per year
- Minimum annual contribution: Rs.600 in each subscriber account
- E class: Investment in equity market instruments. It invests in Index funds that replicate the portfolio of either BSE sensitive index or NSE Nifty 50 index. In other words, the wealth is invested in Nifty stocks in the same proportions as their weight in the Index. This method reduces the risk and there is little reason to worry.
- G class: Investment in government securities like GOI bonds and state government bonds.
- C class: Investment in fixed income securities other than government securities , such as infrastructure bonds, PSU bonds, bank fixed deposits.
WHEN TO WITHDRAW?
- PENSION FUND REGULATORY AND DEVELOPMENT AUTHORITY((PFRDA): PFRDA is the regulator for the NPS. It was established by the Government of India, ministry of Finance, to promote old age income security.
- PENSION FUND MANAGERS (PFMs): The PFMS manage the retirement savings of subscribers under the NPS. .The PFMs are appointed by PFRDA. PFMs manage the retirement savings of subscribers under the NPS. The PFMs invest in accordance with the guide lines of government. It has been provided that no pension fund will invest out side India.
- POINTS OF PRESENCE(POPs): Points of Presence act as the customer interface for non-government subscribers who wish to open Permanent Retirement Account (PRA) with Central Record keeping Agency(CRA) for the purpose of subscribing to the NPS. POPs are appointed by PFRDA.
- CENTRAL RECORD KEEPING AGENCY (CRA): National securities Depository Limited (NSDL) has been appointed as the CRA. The record keeping , administration and customer service functions for all subscribers of the NPS shall be centralized and performed by the CRA. The CRA shall also provide periodic, consolidated PRAN (Permanent Retirement Account Number) statements to each subscriber.
- NPS TRUST: PFRDA has established the NPS Trust and appointed trustees for the administration of the National Pension System. The Trust is responsible for taking care of the funds under the NPS.
- NPS TRUSTEE BANK: The trust holds an account with Bank of India and this bank is designated as the NPS Trustee Bank.
- THE PENSION FUND REGULATORY AND DEVELOPMENT AUTHORITY ACT 2013
- PENSION FMC-NATIONAL PENSION SYSTEM.
- NATIONAL PENSION SYSTEM -RETIREMENT PLAN FOR ALL
- NEW PENSION SCHEME –STANDARD OPERATING PROCEDURE