National Pension System

NPS- Introduction and Journey

National Pension System (NPS) is a voluntary, defined contribution
retirement savings scheme designed to enable the subscribers to make
optimum decisions regarding their future through systematic savings
during their working life.
National Pension System (NPS) was created by an Act of Parliament and its
administered and regulated by Pension Fund Regulatory and Development
Authority (PFRDA).
1st January 2004- NPS was launched by Government of India for
Government employees.
1st May 2009- NPS was opened for all citizens under “All Citizen Model”
December 2011- Corporate Sector Model was launched
NPS- Benefits To the Employee

Prudentially
Tax Benefits- Regulated –
Enjoy Tax Transparent
investment norms,
benefits over regular monitoring
and above the Low Cost - and performance Portable - Can
limits of 80CCE NPS is review of funds by operate an
considered to NPS Trust. account from
anywhere in the
be the world’s country and pay
Flexible - lowest cost contributions
Applicant can through any of the
choose his/her pension
POP-SPs.
own investment scheme
option and
Pension Fund or
select Auto
choice to get
better returns.
 Types of Contributions
Types of Contribution Tax Benefit Capping on Tax benefit Applicable Tax Regime
Eligible for tax deduction up to
10% of Salary (Basic + DA) No capping on investment, but
Subscriber's own Contribution
under Section 80 CCD(1) within the tax benefit is capped only Old Tax Regime
within 80C
the overall ceiling of Rs. 1.50 up to 10% of basic.
lakhs under Sec 80 CCE.
Subscriber is allowed deduction
in addition to the deduction
allowed under Sec. 80CCD(1) No capping on investment, but
Subscriber's own Contribution
for additional contribution in the tax benefit is limited only Old Tax Regime
over and above 80C
his NPS account subject to up to Rs.50, 000/-
maximum investment of Rs.
50,000/- under sec. 80CCD 1(B).
The employee is eligible for tax
Aggregate amount of any
deduction up to 10% of Salary
contribution made by the
(Basic + DA) to an extent of Rs.
employer in a recognized
Employer Contribution over 7,50,000 contributed by
Provident Fund, NPS and an Old and New
and above 80C employer under Sec 80 CCD(2)
approved Super Annuation
over and above the limit of Rs.
fund up to Seven Lakh and Fifty
1.50 lakhs provided under Sec
Thousand Rupees.
80 CCE.
Types of Accounts
Investment in Asset Classes
Under the NPS, individual savings are pooled in to a pension fund which are
invested by PFRDA regulated professional fund managers as per the approved
investment guidelines in to the diversified portfolios comprising of government
bonds, bills, corporate debentures and shares. These contributions would grow and
accumulate over the years, depending on the returns earned on the investment
made.
There are four Asset Classes -
 Equity (Contribution is allowed to the extent of 75% only)
 Corporate Bond (Contribution is allowed to the extent of 100%)
 Government Bond (Contribution is allowed to the extent of 100%)
 Alternative Infrastructure (Contribution is allowed to the extent of 5% only)
However, the total allocation across the specified asset classes must be equal to 100%
Investment Choice for Asset Allocation
The Corporate as well as the Subscriber can have any of the two choices for their asset
allocation:
Active Choice: Subscriber, as the case may be, will have the option to actively decide as to
how the NPS pension wealth is to be
invested across Asset class E (upto 75%), Asset Class C (100%), and Asset Class G (100%).

Auto Choice: In this option, the investments will be made in a life-cycle fund. Here, the
proportion of funds invested across three asset classes will be determined by a pre-defined
portfolio (which would change as per age of subscriber).
There are three different options available within ‘Auto Choice’ –
• AGGRESSIVE – LC 75- Equity exposure up to 75%
• MODERATE – LC 50- Equity exposure up to 50%
• CONSERVATIVE – LC 25- Equity exposure up to 25%
Liquidity
Partial Withdrawal
• Partial withdrawals are allowed on completion of 3rd
Year in NPS maximum of 25% of the total amount
invested in an individual capacity can be withdrawn.
• Withdrawal is allowed Subject to conditions-
• Children higher education
• Marriage of Children
• Purchase /construction of house
• Critical illness
• Disability more than 75%
• Skill Development or re-skilling any other self-
development activities
• Establishment of own venture or start up
• Allowed to withdraw only a maximum of three times
during the entire tenure of subscription
• Premature withdrawals are not allowed from the
employer contributions.
Premature Exit
• Subscriber may exit NPS only after
completion of 10 years.
• Only 20% of the total corpus can be
withdrawn
• Subscriber can invest/annuitize at least
80% of the pension wealth to purchase a
life annuity from any PFRDA empanelled
Life Insurance Company.
• If Corpus< Rs. 1.00 Lac, complete
withdrawal may be opted.
• Once Withdrawn, NPS account will be
closed.
Maturity and Superannuation
• Can extend the investment up to age of 70 years.
• Fresh contributions are allowed during such a period of
deferment.
• Up to 60% of the total corpus can be withdrawn as lump
and Tax Free.
• Minimum 40% has to be used for buying annuities from an
approved annuity service provider.
• At the age of 60 years, withdrawal up to 100% is allowed
subject to corpus is less than or equal to Rs. 2 lakhs
Withdrawal In case of Death

• Before Maturity
In case of Unfortunate demise of the subscriber
before completion of 60 years/maturity, the
nominee can withdraw the 100% of corpus.
• After Maturity
Nominee / Legal heir would receive the death
proceeds as per the selected annuity plan (pension).
Types of Annuity
1. Annuity for life @ 9%
2. Annuity guaranteed for 5,10, 15 or 20 years and for life thereafter @ 8.5%
3. Annuity for life with return of purchase price on death @ 6.80
4. Annuity for life increasing at a simple rate of 3% p.a. @ 7.25%
5. Annuity for life with a provision of 50% of the annuity payable to spouse of the annuitant for life on
death of the annuitant. @ 8.30
6. Annuity for life with a provision of 100% of the annuity payable to spouse of the annuitant for life
on death of the annuitant. @ 7.75%
7. Annuity for life with a provision of 100% of the annuity payable to spouse of the annuitant for life
on death of the annuitant, with return of purchase price on the death of the last survivor @ 6.75%
8. Click here to check the NPS calculator https://www.hdfcsec.com/offering/nps-national-pension-scheme-
calculator
Choice of Pension Fund Managers
Annuity Service Providers
• HDFC Life Insurance
• Life Insurance Corporation Of
India
• ICICI Prudential Life Insurance
• SBI Life Insurance
• Star Union Daichi Life Insurance
Pension Fund Managers
• HDFC Pension Management Company
Limited
• ICICI Prudential Pension Funds
Management Company Limited
• Kotak Mahindra Pension Fund Limited
• SBI Pension Funds Pvt. Ltd
• UTI Retirement Solutions Limited
• LIC Pension Fund Limited
• Birla Sunlife Pension Management
Limited
List of Documents
Opening New NPS Account Mapping Existing Account
• Submit New Subscriber Registration • Submit Inter sector shifting (ISS-1) form with
(CSRF-1) form along with self-attested copy of
• Self-attested copy of PRAN card
• PAN card
• Address Proof • Cheque of Rs. 23.60/- in the favour of “PoP- HDFC
Securities Limited- Collection A/C- NPS Trust”
• 1 photo
• Cancelled cheque • Corporate HR authorization must be provided
• Corporate HR authorizes the form and submits on Page 2.
to HDFC for PRAN generation i.e., NPS Account
opening • Submits to HDFC Sec representative for
• Once PRAN is generated, Employee mapping NPS account to the company.
receives the intimation via Email and SMS • Once PRAN is migrated, Employee receives
• Employee also gets PRAN kit from
NSDL CRA within 30 days of PRAN • the intimation via Email from NSDL CRA
generation
Fees and Charges
Intermediary Charge head Service Charge Mode of Deduction

Initial Subscriber Registration Rs. 200

Collected upfront
POP_HDFC Initial Contribution 0.25% or Min: Rs. 20 and Max: Rs. 25,000
from the first
securities
All subsequent Contributions 0.25% or Min: Rs. 20 and Max: Rs. 25,000 contribution

Any Non- Financial Transaction Rs. 20

Service Charges Service Charges
Charge head
NSDL Karvy
PRA Opening charges Rs. 40 Rs. 39.36
CRA
Annual PRA Maintenance cost per
account Rs. 95 Rs. 57.63 Collected through
NAV cancellation/
Charge per transaction Rs. 3.75 Rs. 3.36
Deduction
Custodian
SHCIL Asset Servicing (Per Annum) 0.0032%
PFM Investment Management (Per Annum) Maximum Cap by PFRDA is 0.01% pa
NPS Trust For Managing Expenditure 0.005% of the fund value