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Home  > Products > Distribution > NPS Services

What is National Pension System (NPS)

NPS (National Pension System) is a defined contribution based pension system launched by Government of India with the following objectives:

TO PROVIDE OLD AGE INCOME
REASONABLE MARKET BASED RETURNS OVER LONG RUN
EXTENDING OLD AGE SECURITY COVERAGE TO ALL CITIZENS

It is based on a unique Permanent Retirement Account Number (PRAN) which is allotted to each subscriber upon joining NPS. The Government of India in exercise of their executive powers adopted 'National Pension System' (NPS) based on defined contributions in respect of all new entrants to central government services, except the armed forces, with effect from 1st January 2004. Most of the state governments have since notified a similar pension system for their new entrants. NPS accumulates savings into subscribers PRA while he is working and use the accumulations at retirement to procure a pension for the rest of his life.

Salient Features

NPS offers wide range of benefits to individuals, making it a unique investment opportunity. Some of the salient features of NPS are:

Portable Account
The NPS account (PRAN) remains the same irrespective of change of employment or geography
Online Platform
On joining NPS, each subscriber gets a login ID and password of NSDL system for accessing NPS details online
More Offers
It offers subscribers choice of service providers, funds, investment options, pension fund managers, annuity service providers freedom to switch and annuity plans managers
Prudently Regulated
NPS is regulated by PFRDA, with transparent investment norms and regular monitoring and performance review of fund managers by NPS Trust.
Multiple Options
SMC offers you a choice of funds, fund managers and investment options in National Pension system
Transparent Investment Norms
Investment Portfolio under each asset class can be viewed on respective pension fund manager’s website
Efficient Grievance Management
Through CRA / PFRDA website, call center, email or postal mail
Low Cost of Operations
With 0.01% as fund management charge, NPS is one of the world’s least cost investment options

Open my NPS account now!

* All feilds are compulsory

Tax Benefits Under NPS

Individual subscriber (salaried as well as self employed) can avail of the tax benefits as mentioned below:

FOR SALARIED INDIVIDUAL

  • Eligible for tax deduction of up to 10% of salary (Basic + Dearness Allowance) under section 80CCD (1) of Income Tax Act, 1961 within Rs. 1.5lac limit under section 80CCE.

FOR SELF EMPLOYED

  • Eligible for tax deduction of up to 10% of gross income under section 80CCD (1) of Income Tax Act, 1961 with in Rs. 1.5Lac limit under section 80CCE. As per the Finance Bill 2015, additional investment of Rs. 50,000/- will be eligible for tax deduction under section 80CCD (1B) of Income Tax Act, 1961. This benefit will be effective AY 2016 – 17.

Types of Account

The NPS system offers 2 types of account:

Tier I account

  • It is also known as pension account. Withdrawal from this account is restricted till the subscriber attains the age 60 years. Minimum yearly contribution requirement in this account is Rs. 1,000.

Tier II account

  • It is a normal investment account. Withdrawal from this account can be done as per the need of the subscriber. Minimum yearly contribution requirement in this account is Rs. 250, however on 31st March of each year, total value of units in this account should be equal to or more than Rs. 2,000.
An active Tier I account is mandatory for opening Tier II account. Tier II account can be opened along with Tier I account or at any time after Tier I account opening.

Asset Allocation Options

NPS gives subscribers the option to invest according to their choice and risk appetite among three funds. Three asset allocation options under NPS are:

Equity ( Asset Class E )
Corporate Bonds ( Asset Class C )
EXTENDING OLD AGE SECURITY ( COVERAGE TO ALL CITIZENS )

Subscriber can switch the asset allocation once in a financial year.

Investment Options

Depending on the expertise on taking call on right asset mix, subscribers have 2 investment options under NPS

Active Choice

Under this option, subscriber can select the asset allocation among equity, corporate bonds and government securities as per his / her choice.

Auto Choice

Under this option, fraction of funds invested across three asset classes is determined by a pre – defined portfolio which will be based on the age of the subscriber. This is also known as life cycle fund option.

Investment pattern under auto choice is as per the below table:

Age of the Subscriber Equity Corporate Bonds Goverment Securities
< = 35 Yrs 50% 30% 20%
36 48% 29% 33%
37 46% 28% 26%
38 44% 27% 29%
39 42% 26% 32%
40 40% 25% 35%
41 38% 24% 38%
42 36% 23% 39%
43 34% 22% 41%
44 32% 21% 44%
45 30% 20% 47%
46 28% 19% 50%
47 26% 18% 53%
48 24% 17% 56%
49 22% 16% 59%
50 20% 15% 62%
51 18% 14% 65%
52 16% 13% 68%
53 14% 12% 74%
54 12% 11% 77%
> = 55 Yrs 10% 10% 80
  • Re-alignment of portfolio is system driven and is executed on date of birth of the subscribers
  • Subscriber can switch the Investment option once in a financial year

Withdrawal From TIER I NPS Account

Amount from Tier I account can be withdrawn only on exit from NPS. Exit from NPS can be done at any point of time. The payout would be made to subscriber as per the below chart:

Withdrawal before the age 60 years

  • Up to 20% of corpus can be withdrawn in lump sum
  • Minimum 80% of the corpus needs to be invested in annuity

Withdrawal on attaining the age 60 years

  • Up to 60% of corpus can be withdrawn in lump sum
  • Minimum 40% of the corpus needs to be invested in annuity

FAQs

What is the National Pension System(NPS)?
Who can subscribe for NPS?
Who cannot join NPS?
If I have invested in any other Provident Fund, can I still invest in NPS?
What are the benefits of joining the NPS?
What are the tax benefits of NPS?
Is there any maximum age limit for making further contribution to NPS Tier-I account?
How can a subscriber get registered for NPS?
Where do I get the registration forms?
How much does a subscriber need to contribute for Tier-I ?
Is there any upper limit of investment?
What are the POP charges at time of subscription & subsequent contribution?
How much time is required for registration?
When would my contribution be debited from my account?
How do I come to know about the PRAN?
What is PRAN and PRAN Kit?
Whome to contact for non-receipt of PRAN Card?
Can a CRA-FC reject the subscriber application forms?
How can I exit from NPS before the age of 60?
What investment choice / system preference does the subscriber have?
What is Active choice option?
What is Auto Choice - Life cycle Fund?
Can I select both investment choices when investing in NPS?
How do I select the Pension Fund Manager for my NPS savings?
Which is the Pension Fund Manager available for NPS?

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