What is NPS?

NPS is a defined contribution pension scheme which is a highly efficient, technology-driven system to save small amounts today, to build a fund for life’s second innings.

NPS has been implemented in our Bank since 18.10.2013 for the public.

Background

• The Government of India introduced NPS for Central Government Employees joining services w.e.f 1st Jan 2004.
• On 1st May 2009, on a voluntary basis, NPS was made available for all citizens of India.
• To enable NRIs access to old-age income security, RBI, in consultation with the Government of India, has enabled NPS as an investment option for NRIs under FEMA,1999.
• PFRDA was created as a regulator for the Pension sector.
• NPS is based on Permanent Retirement Accounts (PRAs) created for individual members.
• NPS accumulates savings into a subscriber’s PRA while he is working and utilizes the accumulations at retirement to procure a pension for the rest of his life.

Objective of NPS Scheme

• To provide old age income.
• To provide reasonable returns over the long-term contribution.
• To extend the old age security coverage to all citizens of India.

Note: NPS is the only choice giving good returns, tax exemption, as well as financial security at old age.

Who Can Join?

You can join if you are any or all of the following:

• Citizen of India; Resident or Non-Resident.
• Age between 18-60 years, as on date of joining.
• Salaried or Self-Employed.
• Complies with KYC norms.

Admission Age Widened Up to 70 Years

Pension Fund Regulatory and Development Authority (PFRDA) is closely monitoring the number of new additions into the National Pension System (NPS) to turn Indian society into a pensioned society. At present, individuals aged 18 to 65 years are eligible for NPS. However, the eligibility norms have been relaxed as per PFRDA circular Ref. No. PFRDA / 2021 / 36 / SUP-CRA / 14 dated 26.8.2021, and the maximum age has been increased to 70 years. Hence, branches may now send NPS applications for those who have crossed 60 years.

Benefits of Extending the Maximum Age to 70 Years

• Better healthcare facilities and increased fitness beyond 60 years paved the way for extending the maximum age.
• NPS provides a robust platform for subscribers to save/invest for old-age income security, even at a later stage in life.
• Annuity rates at an older age fetch better annuities compared to those at age 60 or younger.
• Subscribers joining NPS after 60 years can contribute up to the age of 75, similar to those who joined before 60.

Investment Choice

There is no difference in investment choices for those who join after 60 years; it remains the same as for those who joined before 60 years. If the subscriber chooses Auto Choice, the Life Cycle Fund will have the below-mentioned composition.

Exit Options Categorized Under 3 Occasions

• Premature Exit: At least 5 years of investments need to be retained under NPS before opting for exit for those who joined before 60 years. For those joining after 60 years, exit before completing 3 years is considered premature. If the corpus is ₹2.50 lakhs or less, lump sum withdrawal is permitted. If above ₹2.50 lakhs, 80% of the accumulated wealth must be used for annuity purchase, while the remaining 20% is payable as a lump sum.
• Normal Exit: For those who joined NPS beyond 60 years, normal exit is after 3 years. If the corpus is ₹5.00 lakhs or less, lump sum withdrawal is allowed. If above ₹5.00 lakhs, 40% must be used for annuity purchase, while 60% is paid as a lump sum.
• Death: In case of death, the entire accumulated pension wealth is payable to the nominee or legal heir.

Functions of NPS Intermediaries

PFRDA

NSDL is the PFRDA appointed by the Government. Its functions include:

• Recordkeeping, administration, and customer service functions for all NPS subscribers.
• Issuance of unique Permanent Retirement Account Number (PRAN) to each subscriber.
• Maintaining a database of all PRANs issued and recording transactions related to each subscriber’s PRAN.
• Issuance of PRAN transaction statements.
• Acting as an operational interface between PFRDA and other NPS intermediaries such as Pension Funds, Annuity Service Providers, Trustee Bank, etc.

Key Features of NPS

• 12-digit unique number.
• Issued by the Government of India, hence can be used as an ID card all over India.
• In case of loss/theft, provision for reprinting of PRAN card on a chargeable basis.
• NPS account can be operated from anywhere in the country, irrespective of employment and geography.
• Subscribers can shift from one sector to another (e.g., from Unorganized sector to Central/State Government, etc.).
• Subscribers can also shift within the same sector:
  • From one POP to another POP.
  • Within the same POP.
  • From one POP-SP to another POP-SP.