Introduction

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 Retirement planning should be started by employees during his/her
golden year that is the age of 26 to 35 year. Because at this age employee
have a positive attitude towards retirement. Early retirement plans help
individuals to secure their life after retirement. There are three ways to fulfil
the financial requirement during retirement years: personal saving,
insurance program and employer sponsored pension program. the increase
longevity risk increases the value of regular pension income for after
retirement life. According to United Nation Population fund report the
average life expectancy rate at birth of India was 47 years’ in 1969, it
increased to 60 years in 1994 and 69.73 years in 2020 and it is expected to
increase 77.15 years in 2050. These increasing rates of life expectancy
increase the importance of pension in one’s life.
Before 2004, pension was provided to government sector employees
on Old Pension Scheme (OPS) or defined benefit basic. In Old Pension
System the benefits given to employees after retirement are assured by the
employer. It means employer bear the actuarial and investment risk. Further,
the amount of benefit is calculated on the basis of predetermined formula
which based on salary and number of year of services. But there are various
shortcomings in this existing pension system that leads to pension reform.
This includes low coverage and increasing financial burden, other
shortcomings include increasing age of working population and life
expectancy, low level of financial literacy and awareness etc. To reduce the
burden of existing defined benefit pension scheme, Government of India
introduce National Pension System with effect from January 1, 2004.
National pension system does not guarantee a specific income level upon
retirement. In this system, the liability of employer is limited to the specified
amount of contribution and all other risks are borne by employee.

The National Pension System (NPS) in India is a voluntary, long-term

retirement savings and investment scheme that was introduced by the Indian
government. It is designed to provide individuals with a systematic and
efficient way to accumulate savings for their retirement. The NPS is
regulated and managed by the Pension Fund Regulatory and Development
Authority (PFRDA), which was established to oversee and promote
pension-related activities in the country. It is a simple, transparent, portable,
low cost, flexible and online system, that helps to get regular income and
other benefits after retirement.

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 NPS replace the defined benefit pensions for all its employees who
joined services of central government including central autonomous bodies
(except armed forces) on or after 1st January 2004. And with effect from 1st
May 2009, NPS is extended to all citizens including self-employed
professionals and others working in unorganized sectors on a voluntary
basis.

Background of National Pension Scheme:

The National Pension System (NPS) in India was introduced in 2004
by the Government of India as a voluntary, defined contribution retirement
savings scheme for employees in the public as well as the private sector.
Its primary objective is to provide sustainable retirement income to Indian
citizens.
Here's a detailed overview of its background:
Need for Reform: Before the introduction of NPS, the pension system in
India was predominantly based on the defined benefit structure, which
posed significant fiscal challenges due to its unsustainable nature,
particularly in the public sector.
Committee Recommendations: The government appointed various
committees to study and recommend reforms in the pension system. The
2001 report of the Bhattacharya Committee highlighted the necessity for a
new pension system to address the challenges of an aging population and
fiscal sustainability.
Development and Launch: The NPS was formulated based on the
recommendations of the Pension Fund Regulatory and Development
Authority (PFRDA) Act of 2003. It was officially launched in 2004 for
central government employees, and subsequently extended to all Indian
citizens in a phased manner.
Structure and Features: NPS is a market-linked, defined contribution
pension scheme where the contributions are invested in various financial
instruments such as equities, government securities, corporate bonds, and
alternative assets. It offers two types of accounts: Tier-I (mandatory) and
Tier-II (voluntary), with different withdrawal and lock-in rules.

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Regulatory Framework: The PFRDA regulates and oversees the NPS,
ensuring transparency, efficiency, and protection of the interests of
subscribers. It approves pension fund managers, custodians, and other
intermediaries involved in managing the scheme.
Tax Benefits and Incentives: NPS offers tax benefits under Section
80CCD of the Income Tax Act, allowing contributors to claim deductions
on their contributions, subject to certain limits. Additionally, it provides
flexibility in choosing investment options and pension fund managers.
Expansion and Participation: Over the years, the NPS has witnessed
significant growth in terms of the number of subscribers and assets under
management. It has been made available to various segments such as
corporate employees, self-employed individuals, and non-resident Indians
(NRIs).
Continued Reforms: The government periodically reviews and revises
the NPS framework to align it with evolving market dynamics, regulatory
requirements, and the changing needs of pensioners.
Overall, the NPS represents a significant reform in India's pension
landscape, aiming to promote a sustainable and secure retirement income
system for its citizens.

Objective of study
 To assess the level of financial literacy among different demographic
groups in India.
 To explore the awareness and understanding of the National Pension
System (NPS) among Indian citizens.
 To examine the relationship between financial literacy levels and the
decision to enrol in the NPS.
 To identify the key factors influencing the adoption of the NPS among
Indian citizens.
 To provide recommendations for policymakers and financial institutions
to promote the adoption of the NPS among Indian citizens.

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 Significant of the Study:
 Retirement Security: Understanding the benefits and challenges of
enrolling in the NPS is crucial for ensuring retirement security among Indian
citizens. As the population ages and life expectancy increases, individuals
need effective retirement planning options, and the NPS could play a vital
role in providing financial stability during retirement years.
 Financial Inclusion: Assessing the NPS helps promote financial inclusion
by providing an opportunity for all citizens, including those in rural and
underserved areas, to participate in a formal pension scheme. Understanding
the barriers to enrolment can inform policymakers on how to improve
accessibility and inclusivity within the NPS framework.
 Government Policy Impact: The findings of the study can provide insights
into the effectiveness of government policies related to retirement planning
and social security. By evaluating the benefits and challenges of the NPS,
policymakers can make informed decisions to enhance the system and
address any shortcomings, ultimately benefiting the overall economy and
social welfare.
 Investment Opportunities: The NPS involves investment in various asset
classes, including equities, government securities, and corporate bonds.
Studying its benefits and challenges provides insights into investment
behaviour and preferences among Indian citizens, which can guide
investment strategy development and promote capital market growth.
 Social Welfare: Assessing the NPS contributes to the broader discourse on
social welfare and income security for aging populations. By understanding
the effectiveness of pension schemes like the NPS, policymakers can
develop strategies to address the evolving needs of elderly citizens and
ensure their well-being and dignity in retirement.
Studying the benefits and challenges of enrolling in the National
Pension System for Indian citizens is significant for promoting retirement
security, financial inclusion, informed policymaking, economic stability,
investment opportunities, and social welfare enhancement.

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 Scope of the study:
 Benefits Analysis: The study will examine the various benefits offered by
the NPS, including tax benefits, flexible investment options, and potential
returns. It will assess how these benefits align with the retirement needs and
goals of Indian citizens.
 Challenges Assessment: The research will identify and analyse the
challenges faced by Indian citizens when considering enrolment in the NPS.
This may include lack of awareness, accessibility issues, trust in the system,
and competing investment options.
 Demographic Analysis: The study will explore how demographic factors
such as age, income level, education, and employment status influence the
decision to enrol in the NPS. Understanding demographic trends can help
tailor outreach and education efforts to specific population segments.
 Financial Literacy Evaluation: Assessing the level of financial literacy
among Indian citizens and its impact on NPS enrolment will be a crucial
aspect of the study. It will investigate whether individuals with higher
financial literacy are more likely to enrol in the NPS and make informed
investment decisions.
 Policy Implications: The research will analyse the existing policy
framework governing the NPS and evaluate its effectiveness in promoting
enrolment among Indian citizens. It will also provide recommendations for
policy enhancements to address identified gaps and barriers.
 Recommendations: Based on the findings, the study will offer practical
recommendations for stakeholders, including government agencies,
financial institutions, employers, and advocacy groups, to promote NPS
enrolment and address identified challenges effectively.
Overall, the scope of the study will encompass a comprehensive
examination of the benefits and challenges associated with enrolling in the
NPS for Indian citizens, with the aim of informing policy decisions,
improving financial literacy, and enhancing retirement security for the
population.

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Review of Literature

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The concept of pensions
The concept and theory of pensions revolve around providing financial
support to individuals during their retirement years. Pensions are essentially
a form of retirement plan, typically offered by employers or government
entities, where employees contribute a portion of their income during their
working years, and upon retirement, they receive regular payments to
sustain their living expenses.
The theory behind pensions is rooted in the idea of income security and
stability for retirees. It aims to ensure that individuals can maintain a decent
standard of living even after they stop working. Pensions serve as a form of
income replacement, helping retirees bridge the gap between their pre-
retirement earnings and their post-retirement financial needs.
There are various types of pension schemes, including defined benefit plans,
where retirees receive a predetermined amount based on factors like salary
and years of service, and defined contribution plans, where the retirement
income depends on the amount contributed and investment returns over
time.
Furthermore, pensions play a crucial role in social welfare and economic
stability by reducing poverty among the elderly and fostering long-term
financial planning. Policymakers and economists often study pension
systems to ensure their sustainability and effectiveness in meeting the needs
of aging populations.
The pension system in India is a crucial component of the country's social
security framework, aiming to provide financial support to individuals after
their retirement.

History of National Pension System:

The National Pension System (NPS) in India is a government-
sponsored pension scheme launched in 2004 for all Indian citizens,
including workers from the organized and unorganized sectors. It was
introduced as a voluntary contribution-based pension system, aiming to
provide old age income security to Indian citizens. The initiative was a part
of the pension sector reforms in the country and was initially made available
to the central government employees hired on or after January 1, 2004.

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 Over the years, the NPS has undergone several reforms and
expansions, including making it available to all Indian citizens, both in the
public and private sectors. It operates on a defined contribution basis, where
the accumulated pension wealth depends on the contributions made and the
investment growth over time. The scheme is regulated by the Pension Fund
Regulatory and Development Authority (PFRDA), which is responsible for
regulating and developing the pension market in India.
The National Pension System (NPS) in India has a relatively short but
eventful history. Here is a brief overview of its development:
2003: The concept of the NPS was first introduced by the Government of
India in 2003.
2004: The NPS was officially launched on January 1, 2004, for new
government employees, specifically those in the central civil services.
2009: The NPS was opened to all Indian citizens on a voluntary basis in
May 2009, which meant that individuals in the private sector and self-
employed individuals could also participate.
2011: The NPS architecture was further enhanced in 2011 with the
introduction of two separate accounts within the NPS system - Tier-I and
Tier-II. Tier-I is the primary retirement account with restrictions on
withdrawals, while Tier-II is a voluntary savings account with more
flexibility.
2013: The NPS underwent significant regulatory changes in 2013 when the
Pension Fund Regulatory and Development Authority (PFRDA) Act was
amended to grant more autonomy and regulatory powers to the PFRDA.
2015: The government increased the tax benefits associated with NPS
investments. It allowed an additional tax deduction under Section
80CCD(1B) of the Income Tax Act, encouraging more people to invest in
NPS.
2019: In 2019, the Union Budget allowed for partial withdrawals from NPS
accounts for specific purposes, including higher education, the purchase of
a house, and treatment of critical illnesses. These provisions increased the
flexibility of the scheme.

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Types of Pension Systems:
Government Pension Schemes:
Central Government Pension: Governed by the Central Civil Services
(Pension) Rules, this scheme covers employees of the central government,
armed forces, and other specified categories.
State Government Pension: Each state has its own pension scheme for its
employees, which is governed by its respective rules and regulations.
Social Security Pension Schemes:
Employees' Provident Fund (EPF): A compulsory retirement savings
scheme for employees in the organized sector, managed by the Employees'
Provident Fund Organisation (EPFO).
National Pension System (NPS): A voluntary, contributory pension
scheme for individuals in the organized and unorganized sectors, regulated
by the Pension Fund Regulatory and Development Authority (PFRDA).
Private Pension Schemes: Various insurance companies and financial
institutions offer pension plans, such as annuities and retirement funds,
catering to individuals' retirement needs.
Key Features:
Contributory Nature: Most pension schemes in India require contributions
from both employers and employees, ensuring a pool of funds for
retirement benefits.
Tax Benefits: Contributions to certain pension schemes, such as EPF and
NPS, are eligible for tax deductions under the Income Tax Act,
incentivizing individuals to save for retirement.
Portability: Some pension schemes, like NPS, offer portability, allowing
individuals to carry forward their accumulated savings and benefits even if
they change jobs or locations.
Investment Options: Pension schemes often provide investment choices,
enabling individuals to select their preferred asset allocation based on risk
tolerance and retirement goals.

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 Pay-out Options: At retirement, individuals can typically choose between
lump-sum withdrawals, annuities, or a combination of both, depending on
the terms of the scheme.
Challenges:
Coverage Disparities: Pension coverage remains skewed, with a significant
portion of the population, especially in the unorganized sector, lacking
access to formal pension schemes.
Financial Sustainability: Demographic shifts, such as an aging population
and longer life expectancy, pose challenges to the financial sustainability
of pension systems, necessitating periodic reforms.
Low Awareness: Limited awareness about pension schemes, especially
among low-income and rural populations, inhibits participation and
adequate retirement planning.
Administrative Efficiency: Streamlining administrative processes,
reducing bureaucracy, and enhancing technology adoption can improve the
efficiency and effectiveness of pension delivery systems.
The Indian government continues to undertake reforms to strengthen
the pension system, including expanding coverage, enhancing portability,
promoting financial literacy, and ensuring the long-term sustainability of
pension funds. Additionally, initiatives to leverage digital platforms for
enrolment, contributions, and pay-outs are expected to make pension
schemes more accessible and efficient for all citizens.

Review of Literature
 Dr. Nandkumar Baburao Bodhgire (Oct-Dec, 2021) Discuss features and
functions of National Pension System. He also added tax benefits under NPS
and performance of pension fund managers in terms of its return in 2020, in
his research paper. The main objective of his study to know the function and
benefits of National Pension Scheme to Indian citizen and to analysis the
performance of various pension fund managers under National Pension
Scheme.

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 Dr. Nandkumar analysis the return of various pension funds that is
ICICI Pension Fund, SBI Pension Fund, UTI Retirement Solutions, HDFC
Pension Fund, Kotak Pension Fund. He finds that HDFC Pension Fund is
the Best Performer in NPS Tier I and Tier II as compared with other
retirement funds. He suggests for an individual who invest in NPS that, this
scheme has risk factors yet it gives best return other than investment avenues
and the contributed amount is invested for return instead of saving in
account as a previous pension scheme.

 Mrs. T. Poongothai and Dr.M.Jayanthi (August, 2020) Identify the

concept, structure of NPS and to analyse the importance of NPS for
retirement planning. They explain NPS architecture and benefits of NPS
(mainly Tax Deduction and Tax Benefit). By using of various secondary
data they analysis how National pension system is important for retirement
planning of an individual.
Retirement pension plan ensures that people to live with pride and
without compromising on their standard of living during their retirement
life. At last they conclude that the rising cost of living, inflation and life
expectancy of people make retirement planning essential part of today's life.
So to tackle all those issues and to provide social security to every citizen
the government of India has introduced the National Pension System.
Therefore, every individual retirement planner can make use of the NPS for
making their retirement investment.

 Krishna Murari (November 2020) Mainly focus on whether the pension

fund managers were able to meet the expectations of the subscribers or not
and he analysis the performance of the pension fund managers using risk-
adjusted performance measures. He divides NPS in two types that is one for
organised sector, another is private/unorganised sectors.
According to Krishna Murari when NPS was introduce by
government of India, it has not taken off as expected. To make the scheme
more attractive to subscribers, the PFRDA has made several changes in the
rules governing the scheme. He analysis, under the NPS schemes for central
and state government employees, LIC Pension Funds Ltd and SBI have
recorded the highest returns with more weightage given to LIC Pension
Funds Ltd as compared to other fund managers and for the unorganised and
private sectors, HDFC Pension Funds has generated the highest returns

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 while ICICI prudential pension funds have also been given preference by
some statistical measures.

 Renuka Sane and Susan Thomas (July 2014) Addressed that there are
certain critical areas in which the NPS has deviated. These include
multiplicity of schemes, lack of investment choice, low transparency of the
system, and a lack of focus on keeping asset management fees low. In their
paper they give some solution about these problems.
At last they give a statement that, PFRDA can build trust in the system
by ensuring that the interests of the NPS customers is the primary focus. In
addition, the PFRDA can also set in motion the next step of policy initiatives
to ensure that increased coverage of the wider informal workforce.

 Dr. Roopali Patil (May–June 2017) mainly concentrates on the cost

benefit analysis of the scheme for people of different age groups. Dr. Patil
investigate the returns from NPS after considering tax and other processing
charges. Basically she follows the case study method of analysis on the basis
of age, investment period, processing charges, and taxation policies of the
government.
At last she concluded that the National Pension System is a unique
pension system and offers various benefits to the investors such as minimum
processing charges and Tax benefits.

 Dr. K. Balanaga Gurunathan and Ramakoti Mandal (2022) Analysis the

performance of the National Pension Scheme funds supplied by different
companies is examined in order to determine which funds to invest in order
to increase income. After that they give suggestion to Individual/Investors,
Companies and also Government.
For investors, those investors want to secure their retirement period
with a low cost investment and fewer risk they can invest in NPS before
making an individual analysis. For companies, to attract more investors they
can lower their charges and their fund should achieve better return to meet
out the benchmark return. For Government, they should increase
contribution limit, offer guaranteed pension amount for the investor and
should provide additional tax benefits for getting more investors.

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 K Seethal & B Menaka trying to evaluate the importance of NPS for
retirement planning, its structure and the taxation and GST aspect of
National Pension scheme.
According to K Seethal & B Menaka, the removal of GST on the
annuity value and 40 % tax exemption on the total fund is making the
scheme more interesting. Annuities can be purchased for 100 % of the
corpus which helps in financially securing the post retirement life for an
individual by ensuring a monthly pension scheme after retirement.
Individuals who lack knowledge about financial market can easily access
NPS by approaching the designated private or public sector banks.

 Neeti Hooda & Dr. Kuldip Singh Chhikara (October 2018) provides the
detailed analysis of working of NPS in India and further tried to evaluate
the performance of NPS in over a period from 2013 to 2017.
They analysis the role of NPS in the economy and capital market can
be examined in terms of accumulation of institutional capital, development
of capital market through creation of demand for financial instruments,
support to improve financial market research, risk rating standard, corporate
governance etc. which not only gives momentum to growth but also lead
towards economic development of the country.

Research Gap:
Research Gap Statement: Despite the growing importance of financial
literacy in making informed decisions about retirement planning, there is a
lack of comprehensive research focusing on how varying levels of financial
literacy impact the decision-making process of Indian citizens when
considering enrolment in the National Pension System (NPS).

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 Understanding
National Pension
Scheme

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 The National Pension System (NPS) in India is a government-
sponsored retirement savings scheme, introduced in 2004 by the Pension
Fund Regulatory and Development Authority (PFRDA). It aims to provide
financial security and stability during old age by encouraging individuals to
save systematically for their retirement. The NPS is open to all Indian
citizens, including employees from the public, private, and unorganized
sectors.
One of the distinctive features of the NPS is its defined contribution
structure, where the pension wealth depends on the contributions made by
the individual during their working years and the returns generated on those
contributions. This structure shifts the investment risk from the government
to the individual, providing them with greater control over their retirement
savings.
Under the NPS, subscribers have the flexibility to choose their
investment options and pension fund managers from a list of PFRDA-
regulated entities. These options include a mix of equity, corporate bonds,
government securities, and alternative assets, allowing individuals to tailor
their investment strategy according to their risk tolerance and retirement
goals.
Moreover, the NPS offers two main types of accounts: Tier-I and Tier-
II. Tier-I is the primary retirement account with restrictions on withdrawals,
ensuring that individuals maintain their savings for retirement. On the other
hand, Tier-II is a voluntary savings account that allows subscribers to
withdraw their funds as per their financial needs, providing greater liquidity.
Furthermore, the NPS provides tax benefits to subscribers, making it
an attractive retirement planning tool. Contributions made towards the NPS
are eligible for tax deductions under Section 80C of the Income Tax Act, up
to a certain limit, with an additional deduction available for contributions
towards the National Pension System under Section 80CCD(1B).
Additionally, the scheme offers tax-free withdrawals up to a certain limit,
providing further incentives for long-term savings.
In recent years, the NPS has undergone several reforms and
enhancements to make it more inclusive and participant-friendly. The
government has introduced features such as the Auto Choice option, which

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automatically allocates investments based on the subscriber's age, and e-
NPS, allowing individuals to open and manage their NPS accounts online.
Overall, the National Pension System plays a crucial role in promoting
a culture of long-term savings and retirement planning in India, offering
individuals a reliable avenue to build a financially secure future post-
retirement.

Parties involve in NPS

1. PFRDA (Pension Fund Regulatory and Development Authority):
The Pension Fund Regulatory and Development Authority (PFRDA)
is the apex regulatory body in India overseeing the pension sector.
Established in 2003, it operates under the jurisdiction of the Ministry of
Finance, Government of India. PFRDA's primary objective is to promote
pension coverage, develop the pension industry, and protect the interests of
pension subscribers. PFRDA's role encompasses a wide range of functions,
including regulation, supervision, and promotion of pension-related
activities.
PFRDA's key responsibilities and activities:
 Regulation and Oversight
 Licensing and Registration:
 Market Development:
 Educational Initiatives:
 Supervision and Monitoring:
 Policy Advocacy:
 International Cooperation:
In summary, PFRDA plays a pivotal role in regulating, supervising, and
promoting the pension sector in India, with a focus on expanding pension
coverage, ensuring transparency and accountability, and safeguarding the
interests of pension subscribers. Its efforts contribute to building a robust
and sustainable pension system that provides financial security and dignity
in retirement for all citizens.

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 2. Point of Presences (pop)
In the context of the National Pension System (NPS) in India, Point
of Presence (PoP) refers to authorized entities that act as intermediaries
between the NPS subscribers and the NPS system. PoPs play a crucial role
in facilitating the on boarding process, accepting contributions, providing
customer service, and offering various NPS-related services to individuals
across the country. Here's a detailed explanation of the role and functions of
PoPs in the NPS:
In summary, Point of Presence (PoP) plays a pivotal role in the National
Pension System (NPS) by serving as a link between subscribers and the NPS
system. They facilitate the on boarding process, collect contributions,
provide customer service, distribute information, assist with withdrawals,
and ensure compliance with regulatory requirements, thereby contributing
to the growth and effectiveness of the NPS in India.

3. NPS Trust:
The NPS Trust is a key component of the National Pension System
(NPS) in India, established to oversee and manage the pension funds
contributed by subscribers and ensure the smooth functioning and integrity
of the NPS.
NPS Trust, its structure, functions, and significance:
 Establishment and Legal Framework
 Custodian of Pension Funds
 Investment Management
 Governance and Oversight
 Subscriber Services and Grievance Redressed
 Educational Initiatives and Awareness Programs
 Policy Advocacy and Research
The NPS Trust plays a pivotal role in the administration, management,
and oversight of the National Pension System (NPS) in India. It serves as
the custodian of pension funds, manages investments, ensures regulatory
compliance, provides subscriber services, promotes financial literacy, and
advocates for pension reform, thereby contributing to the growth and
sustainability of the NPS and the welfare of NPS subscribers.

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 4. Central Record Keeping Agency:
In the context of the National Pension System (NPS) in India, a
Central Record Keeping Agency (CRA) is a crucial entity responsible for
maintaining accurate and up-to-date records of NPS subscriber accounts and
transactions. The CRA plays a pivotal role in the administration and
management of the NPS, ensuring efficient record-keeping, transaction
processing, and service delivery to subscribers.
functions, structure, and significance of a Central Record Keeping Agency:
 Establishment and Oversight
 Account Maintenance
 Transaction Processing
 Data Security and Confidentiality
 Subscriber Services and Support
 Integration with Other NPS Entities
A Central Record Keeping Agency (CRA) serves as the backbone of
the National Pension System (NPS) in India, responsible for maintaining
accurate, secure, and reliable records of subscriber accounts and
transactions. It plays a vital role in ensuring operational efficiency, data
integrity, regulatory compliance, and subscriber satisfaction within the NPS
ecosystem, thereby contributing to the success and sustainability of the
pension system.

5. Trustee Bank
In the National Pension System (NPS) in India, the Trustee Bank serves
as a critical entity responsible for overseeing the financial transactions, fund
management, and custodial services associated with the NPS corpus.
Trustee Bank's role, functions, and significance within the NPS
framework:
 Custodial Services
 Settlement of Transactions
 Investment Management Support
 Reporting and Compliance
 Operational Support
 Risk Management

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 The Trustee Bank plays a vital role in the administration, management,
and oversight of the financial assets within the National Pension System
(NPS) in India. It acts as the custodian of pension funds, facilitates the
settlement of transactions, supports investment management activities,
ensures compliance with regulatory requirements, provides operational
assistance to stakeholders, and manages risks associated with fund custody
and settlement. The Trustee Bank's contributions are essential for
maintaining the integrity, stability, and reliability of the NPS platform,
thereby safeguarding the interests of NPS subscribers and promoting the
long-term sustainability of the pension system.
6. Pension Fund Manager
A pension fund manager is a financial institution or entity responsible
for managing the investment portfolios of pension funds within the National
Pension System (NPS) or other retirement savings schemes. These
managers play a crucial role in determining the growth and sustainability of
pension assets, with a primary objective of generating favourable returns
while managing risks to meet the long-term financial needs of retirees.
Function of pension fund manager:
 Investment Management
 Asset Allocation and Risk Performance
 Monitoring and Reporting
 Compliance and Regulatory Compliance
 Client Services and Communication
A pension fund manager plays a crucial role in managing the investment
portfolios of pension funds within the National Pension System (NPS) or
other retirement savings schemes. They are responsible for asset allocation,
risk management, performance monitoring, compliance, client services, and
innovation, aiming to achieve long-term financial security and retirement
income for pension fund beneficiaries. By adhering to fiduciary duties,
regulatory requirements, and best practices in investment management,
pension fund managers contribute to the growth, sustainability, and integrity
of pension assets, thereby fulfilling the retirement needs and aspirations of
individuals.

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 7. NPS Custodian
In the context of the National Pension System (NPS) in India, a
custodian is an entity responsible for safeguarding the assets of the NPS
corpus and ensuring their secure custody, settlement, and administration.
The custodian plays a crucial role in maintaining the integrity, safety, and
reliability of the NPS infrastructure, facilitating the smooth operation of
financial transactions and investment activities.
Role of An NPS Custodian:
 Safekeeping of Assets:
 Settlement of Transactions:
 Asset Servicing and Administration:
 Risk Management:
 Compliance and Reporting:
 Integration with Other NPS Entities:
NPS custodian plays a vital role in ensuring the safekeeping, settlement,
and administration of assets within the National Pension System (NPS) in
India. By providing secure custody, efficient settlement, and robust risk
management services, the custodian contributes to the integrity, stability,
and reliability of the NPS infrastructure, thereby safeguarding the interests
of NPS subscribers and promoting the long-term sustainability of the
pension system.

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Component of NPS
Types of NPS Accounts
One needs to know about the NPS account types to accrue benefits.
This low-cost structure, tax-efficient, and flexible investment plan acts as
an effective financial instrument for people who are looking to save after
retirement. The two types of NPS schemes are as follows:
 Tier-I NPS account.
 Tier-II NPS account.

Tier-I NPS Account:

This is the basic and mandatory NPS account that is opened to save
up for retirement. From this account, one cannot withdraw before 60 years
of age. Nonetheless, upon attaining 60 years of age, the pensioner can
withdraw 60% of his investments and utilise the rest to buy an annuity. The
annuity plan will enable an individual to get fixed premiums at regular
intervals.

Investments under this account are tax deductible up to ₹2 lakhs per

annum under Section 80C of Income Tax. An additional ₹50,000 may be
deducted per annum under Section 80CCD (1B). However, as per the Union
Budget 2019 announcements, 60% of the accumulated corpus withdrawn at
the time of retirement would enjoy tax exemption from the Fiscal Year
2020-21. Therefore, the NPS becomes a reliable saving option like PPF and
EPF.
Furthermore, while opening a Tier-I account, an individual will
receive a Permanent Retirement Account Number after making a minimum
contribution of ₹500. To sustain an NPS Tier-I account, one needs to
contribute a minimum of ₹1000 per annum.
However, there is no cap on the maximum amount for this type of
NPS account. To open this account, one needs to present identity, address
and age proof documents and fill up the respective registration form.

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Tier-II NPS Account:
This is a voluntary retirement and savings account that may be opened
if an individual already has a Tier-I account. Withdrawals or contributions
to and from this account can be made at any time at the pensioner’s
convenience. The investments on this account have no tax deductions for
private-sector or self-employed personnel.
Further, according to the Finance Ministry’s announcement in the
Union Budget 2019, one can claim tax benefits on this account within the
lock-in period. This makes this scheme at par with the Equity Linked Saving
Schemes (ELSS).
To open a Tier-II NPS account, one needs to make a contribution in
multiples of 250. Although there are no tax exemptions related to this kind
of account, both the Tier-I and II NPS accounts have similar fund
management costs and investment choices. Also, as opening a Tier-II
account requires an individual to have an existing Tier-I account, he does
not need to present KYC documents.

NPS Contribution
For Government Employee
In India, NPS (National Pension System) is a voluntary, defined
contribution retirement savings scheme. Government employees, including
those in the central and state governments, have the option to join the NPS.
Under the NPS for government employees, both the employee and the
government make contributions towards the employee's retirement fund.
The contributions are made regularly throughout the employment period.
The employee can choose the allocation of these contributions among
various investment options offered by the NPS, such as equity, corporate
bonds, government securities, and alternative investment funds.
The government's contribution to the NPS for its employees typically
follows a matching formula, where it matches a certain percentage of the
employee's contribution, up to a specified limit. The specific details of this
matching contribution can vary depending on the policies of the respective
government departments or organizations.

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Overall, the NPS for government employees serves as a long-term
retirement savings vehicle, with contributions from both the employee and
the government aimed at building a substantial corpus for retirement
benefits.
For non government employee:
Non-government employees in India also have the option to participate in
the National Pension System (NPS), which is a voluntary retirement savings
scheme.
Non-government employees, including those working in the private sector
and self-employed individuals, can voluntarily enrol in the NPS. Once
enrolled, non-government employees contribute a certain percentage of
their salary or income towards their NPS account on a regular basis. These
contributions are deducted from their salary or income and deposited into
their NPS account. Non-government employees have the flexibility to
choose the amount they want to contribute towards their NPS account,
subject to certain limits prescribed by the Pension Fund Regulatory and
Development Authority (PFRDA), the regulatory body overseeing the NPS.
Similar to government employees, non-government employees can
also choose how their contributions are invested among various asset classes
such as equity, corporate bonds, government securities, and alternative
investment funds. They can select their investment preferences based on
their risk appetite and retirement goals. Contributions made by non-
government employees towards their NPS account are eligible for tax
benefits under Section 80CCD (1) of the Income Tax Act, up to a certain
limit. Additionally, contributions made by the employer on behalf of the
employee are also eligible for tax benefits under Section 80CCD (2).
Overall, the NPS provides non-government employees with an
opportunity to build a retirement corpus through regular contributions, with
the flexibility to choose their investment options and avail tax benefits. It
serves as a long-term savings instrument to secure their financial future
post-retirement.

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Investment Choice:
Active Choice:
Active Choice in the National Pension System (NPS) refers to the
option given to subscribers to actively manage the asset allocation of their
pension contributions among various investment options offered by the
NPS. When subscribers opt for Active Choice, they have control over the
proportion of their contributions that are invested in different asset classes
such as equity, corporate bonds, government securities, and alternative
investment funds.
Investor will have the option to actively decide as to how your NPS pension
wealth is to be invested in the following three options:
 E - “High return, High risk” – investments in predominantly equity
market instruments
 C - “Medium return, Medium risk” – investments in predominantly
fixed
income bearing instruments
 G - “Low return, Low risk” – investments in purely fixed income
instruments.
Investor can choose to invest your entire pension wealth in C or G
asset classes and up to a maximum of 50% in equity (Asset class E). You
can also distribute your pension wealth across E, C and G asset classes,
subject to such conditions as may be prescribed by PFRDA. In case you
decide to actively exercise your choice about investment options, you shall
be required to mandatorily indicate your choice of Pension Fund from
among the six Pension Funds appointed by PFRDA.

Overall, Active Choice empowers NPS subscribers to take a more

hands-on approach to managing their retirement savings by allowing them
to customize their asset allocation according to their individual investment
preferences and risk appetite.
Auto choice:
Auto Choice in the National Pension System (NPS) is an investment
option designed for subscribers who prefer a hands-off approach to
managing their pension contributions.

Page:25
NPS offers an easy option for those participants who do not have the
required knowledge to manage their NPS investments. In case you are
unable/unwilling to exercise any choice, your funds will be invested in
accordance with the Auto Choice option. In this option, the investments will
be made in a life-cycle fund.
Here, the fraction of funds invested across three asset classes will be
determined by a pre-defined portfolio. At the lowest age of entry (18 years)
the auto choice will entail investment of 50% of pension wealth in “E”
Class, 30% in “C” Class and 20% in “G” Class. These ratios of investment
will remain fixed for all contributions until the participant reaches the age
of 36. From age 36 onwards, the weight in “E” and “C” asset class will
decrease annually and the weight in “G” class will increase annually till it
reaches 10% in “E”, 10% in “C” and 80% in “G” class at age 55.

NPS Withdrawal:
Full Withdrawal
Full withdrawal in the National Pension System (NPS) refers to the
process by which a subscriber can withdraw the entire accumulated pension
wealth from their NPS account upon reaching retirement age or meeting
certain conditions specified by the Pension Fund Regulatory and
Development Authority (PFRDA).
• Up to 60% of Corpus can be withdrawn in lump sum
• Balance amount needs to be invested in annuity.

Partial withdrawal
Partial withdrawal in the National Pension System (NPS) allows
subscribers to withdraw a portion of their accumulated pension wealth
before reaching retirement age, subject to certain conditions and limitations
set by the Pension Fund Regulatory and Development Authority (PFRDA).
Here are the key rules and guidelines for partial withdrawal in NPS:
• Subscriber should be in NPS at least for 3 years.
• Withdrawal amount will not exceed 25% of the contributions.
• Withdrawal can be happened maximum 3 time during entire tenure.

Page:26
Tax Benefits
Tax benefits on the National Pension System (NPS) in India are available at
various stages, including contributions, accumulation, and withdrawals.
Here's a breakdown of the tax benefits associated with NPS:
Tax Deduction on Contributions (Section 80CCD):
Individuals contributing to their NPS account are eligible for tax
deductions under Section 80CCD of the Income Tax Act, 1961.
 For employees:
Up to 10% of salary (basic salary plus dearness allowance) contributed by
the employee and matched by the employer is eligible for deduction under
Section 80CCD (2). This is over and above the limit of Rs. 1.5 lakh available
under Section 80C.
 For self-employed individuals and others:
Up to 10% of gross income (in the case of self-employed individuals) or
20% of gross total income (for others) contributed by the individual is
eligible for deduction under Section 80CCD (1), subject to a maximum of
Rs. 1.5 lakh combined with Section 80C.
Tax-free Growth: The returns generated on the investments in NPS,
whether through contributions made by the subscriber or the employer,
grow tax-free during the accumulation phase. This includes interest,
dividends, and capital gains earned on the investments.
Partial Withdrawals: Partial withdrawals from NPS are tax-exempt up to
25% of the subscriber's own contributions, subject to certain conditions and
limitations. This exemption is available for specified purposes such as
higher education, marriage, medical treatment, and purchase/construction
of a residential house.
Annuity Purchase: When a subscriber uses a portion of their accumulated
pension corpus to purchase an annuity from a PFRDA-approved annuity
service provider, the annuity income received is taxed as per the prevailing
income tax laws. However, only the amount received as an annuity is taxed,
not the entire corpus.
Full Withdrawal: At the time of retirement or reaching the age of 60,
subscribers can withdraw up to 60% of their accumulated pension wealth as
a lump sum without tax implications. The remaining 40% must be used to
purchase an annuity, which provides a regular income stream and is taxed
as per the individual's income tax slab.

Page:27
 Research
Methodology

Page:28
 Data Source

Primary Data:
Primary data have been collected from Different age group of people who r
on my contact through online and offline quizzes to assess the knowledge
about National Pension Schemes. I collect the data from primary source
through Formapps and offline questionnaire.

Secondary data:
Secondary data like All the information related to national pension scheme
I collected through various website available on internet.

Research Methods:
To accomplish objectives of the study following research method have been
used in the process of this research study.
 Descriptive Research

Descriptive Research:
This research approach is used to study the characteristics of a group. In my
study the group people belong Kalahandi district. I have used this method
to understand is the people are aware about NPS and understand people
thinking who enrolled in National Pension Scheme.

Page:29
Analysis of data

Page:30
Sample of People’s Data:

Here the sample data collected from Different age group of people. I collect
from the people who are only in my contact. Hear I receive 78 respondents
from different age group. Out of 78 respondents 17 respondent are belongs
to 20 to 30 age group, 34 respondents are belonging to 30 to 40 age groups,
12 respondents are belonging to 40 to 50 age group, 15 respondents are
belonging to above 50 age group.

RESPONDENTS

50 and avobe 20-30

40-50

30-40

Age Group Respondents

20-30 17
30-40 34
40-50 12
50 and above 15

Page:31
Question 1:
Are you aware of the National Pension Scheme(NPS)?

Out of 78 people 61 people aware about National Pension Scheme

and 17 people are not.

Responses

no

yes

2 people from 20-30 age group, 4 people from 30-40 age group, 5
people from 40-50 age group, 6 people from above 50 age group are not
aware about National Pension Scheme(NPS).
Almost 78% people are aware about NPS but and 22% of people out of 78
people are not aware about NPS.

Page:32
Question 2:
How did you become aware of the National Pension Scheme(NPS)?

Responses

Not aware

Others

Family & Friends

Finalcial Advisory

Govt. Advertise

0 5 10 15 20 25 30 35

Hear I give 5 options to know that how the peoples are aware about
National Pension Scheme. It was found that most of the people choose other
options which means they will aware about NPS through social media/ TV/
Their institution etc. The second highest response comes from family and
friends. Which means very less percentage of people aware about NPS
through Government advertise and none of them are aware through their
financial advisory.

Page:33
Question 3:
Are you currently enrolled in the National Pension Scheme(NPS)?

Responses

Yes

No

Out of 78 people 23 people are enrolled in the NPS and 55 people are
not enrolled which shows that most of the people from the sample are not
enrolled in the NPS even they are aware about this. I try to find the reason
for not enrolling in NPS in the next question.

Question 4:
If no what are the reason for not enrolling?

Responses

Others

Prefere other retairment shaving options

Concern about investment risk

Lake of understandings about NPS benefits

0 5 10 15 20 25

Page:34
 Hear I give 4 option to choose why they are nor enrol in the NPS. In
other option they give their reason. I found that out 55 people wo not enrol
in the NPS 19 people are not enrol due to lake of understanding about NPS
benefits. 5 people are concerned about investment risk and 11 people prefer
other retirement shaving option. Those who select other option they
mansion that they didn’t enrol in NPS because of complexity of rule, not
having regular income, they might enrol in future.

Question 5:
Factor influencing your decision to enrol in the National Pension Schemes
(NPS)?

Responses
Not Enrolled

Other

Retirement Security

Investment Flexibility

Tax Benefits

0 10 20 30 40 50 60

Hear I found that out of 78 people 55 people are not enrol but those
who enrol because of some factors that is Retirement Security, Investment
Flexibility and Tax benefits.

Page:35
Question 6:
How satisfied are you with the benefits offered by NPS?

Responses
15

10

0
5 4 3 2 1

Hear I want to know the people who enrol in NPS how much satisfy
with that. I give them rate out of 5 star. I found that 14 people quite happy
with enrolling in NPS because they give 4 and 5 star. And 9 people give 3
and 2 star.

Question 7:
Main challenges you perceive in enrolling in the NPS.

Responses
Others

Investment Risk

Accessbility Issues

Low Awarness

0 2 4 6 8 10 12 14 16

Page:36
 There is 4 option for this question. Most of the people think that the
main challenges involve in enrolling in the NPS is the low awareness among
people. Some of the people think that there is investment risk and
accessibility issue.

Question 8:
Are you think that OLD pension System are good for the people?

Responses
45

26
7

YES NO NOT SURE

Hear I ask if people likes old pension scheme over new pension
scheme and I found that 45 people out of 78 said yes. That because of there
is no need to contribute to NPS account in old pension scheme. Only 7 no.
of people said NPS is the better option. 26 people not sure about which
pension system is better.

Page:37
Question 9:
Do You Have plan to contributing to the NPS in Future?

Responses

Not sure

No

Yes

0 5 10 15 20 25 30 35 40 45 50

Hear I want to know whether the people are interested in contributing

towards NPS or not. I found that most of the people like to contribute
towards NPS in future. Vary small percentage of people don’t like to
contribute on NPS and some people not sure about that.
Question 10:
Is there anything else you would like to share about your experience with
the national pension Scheme or suggestion for improvement?
Hear most of the people respond that government should increase
program to aware peoples are living in urban and rural area, some of the
people respond that there should be make regulation to simplify in the rule
of National Pension Scheme. Some people thought that old pension scheme
are better because they no need to contribute on that but as per New pension
scheme they have to contribute 10% of their basic salary which may be a
cost for them.

Page:38
Conclusion

Page:39
 Findings:
After analysing the all data collected I found both positive and negative
result but the negative result more than the positive results. Some of key
findings are pointed out;

 Out of 78 people 17 people are not aware about National Pension System.
Those who aware about NPS they aware from family and friends and others.
Not much people aware from the government advertisement.

 Another negative result is that even people aware about National Pension
Scheme but they don’t enrol in the NPS. The reason behind that
understanding about NPS benefits, prefer other retirement shaving option,
concerned about investment risk and some other reason.

 The main challenges in enrolling NPS is that lake of awareness about NPS
and the lake of accessibility. Most of the people think that the Old pension
system are far better than new one.

 Some positive result also comes from this research is that most of the people
who are not enrolled in the National Pension Scheme till now they like to
contribute towards NPS in future. In this category most people comes from
20-30 age groups.

Page:40
 Suggestion:
Policy Recommendations: Based on the findings of the study, propose
policy recommendations to address the identified challenges and leverage
the benefits of NPS enrolment. These recommendations could focus on
regulatory reforms, tax incentives, investment options, or customer service
enhancements to improve the attractiveness and effectiveness of NPS for
Indian citizens.
Educational Campaigns: Develop educational campaigns and outreach
initiatives to raise awareness about the importance of retirement planning
and the benefits of enrolling in NPS. Targeted communication strategies can
help dispel misconceptions, increase understanding, and encourage greater
participation among Indian citizens, especially those in underserved or
marginalized communities.
Financial Literacy Programs: Collaborate with government agencies,
financial institutions, and community organizations to implement financial
literacy programs that specifically address retirement planning and NPS
enrolment. These programs can provide practical guidance, tools, and
resources to help individuals make informed decisions about their pension
contributions and investment choices.

Limitation of Study:

 My research was only conducted within the people which are under my
contact.

 Those people who give response are generally belong to Bhawanipatna.

 It was also conducted with limited questionnaire.

Page:41
 Reference:
 Dr. Nandkumar Baburao Bodhgire (Oct-Dec, 2021), Assistant Professor in
Economics: “National Pension Scheme in India: Functions and
Performance.”

 Mrs. T. Poongothai and Dr. M. Jayanthi (August, 2020), Department of

Commerce, PSG College of Arts and Science, Coimbatore: “National
pension system for retirement planning.”

 Krishna Murari (November 2020), (Department of Management, Sikkim

University): “Risk-adjusted performance evaluation of pension fund
managers under social security schemes (National Pension System) of
India.”

 Renuka Sane and Susan Thomas (July 2014), “The way forward for India's
National Pension System.”

 Dr. Roopali Patil (May–June 2017), (Assistant Professor, D.Y. Patil

University School of Management): “Cost benefit analysis of National
Pension Scheme.”

 Dr. K. Balanaga Gurunathan and Ramakoti Mandal (2022): “Return

analysis of National Pension Scheme in India.”

 K Seethal (Research Scholar, Department of Commerce), Alagappa

University, Karaikudi) & B Menaka (Assistant Professor, Department of
Commerce, Alagappa University, Karaikud): “Evaluation of National
Pension Scheme for retirement planning.”

 Neeti Hooda & Dr. Kuldip Singh Chhikara (October 2018): “National
Pension System- the way forward towards pragmatic approach to
sustainable investment system.”

Page:42
 www.googlescholar.com
 www.chatgpt.com
 www.Gemini.com
 www.wikipedia.com
 www.npscra.nsdl.co.in
 www.nsdl.com
 www.pfrda.org.in

Page:43
Appendices

Page:44
Questionnaire for the project report on “Assessing the benefits and
challenges of enrolling in the National Pension Scheme(NPS) for
Indian citizen with special reference to Kalahandi District”.

Demographic Information
 Name
 Age
 Educational Background
 Occupation
Questions
1. Are you aware of the National Pension Scheme(NPS)?
 Yes
 No
2. How did you become aware of the National Pension Scheme(NPS)?
 Government Advertisement
 Financial Advisor
 Family or Friends
 Others
3. Are you currently enrolled in the National Pension Scheme(NPS)?
 Yes
 No
4. If no what are the reason for not enrolling?
 Lack of understanding about NPS Benefits
 Concerns about investment risk
 Prefer other retirement shaving option
 other
5. Factor influencing your decision to enrol in the National Pension
Schemes (NPS)?
 Tax benefit
 Investment flexibility
 Retirement security
 Others
 Not enrolled

Page:45
6. How satisfied are you with the benefits offered by NPS?
 1 out of 5
 2 out of 5
 3 out of 5
 4 out of 5
 5 out of 5
7. Main challenges you perceive in enrolling in the NPS.
 Low awareness
 Accessibility issues
 Investment risk
 others
8. Are you think that OLD pension System are good for the people?
 Yes
 No
9. Do You Have plan to contributing to the NPS in Future?
 Yes
 No
10. Is there anything else you would like to share about your experience
with the national pension Scheme or suggestion for improvement?

Page:46