The National Pension Scheme is a Defined Contribution Scheme that was set up in 2004 for all Government Employees and was open to the general public in May 2009. It is a social security benefit to create a retirement corpus to meet post retirement income needs, initiated by the Government of India in association with the Pension Regulatory Development Authority.

1. National Pension Scheme
The National Pension System (NPS) [1] is a defined contribution based pension system launched by
Government of India with effect from 1 January 2004. Like most other developing countries, India does
not have a universal social security system to protect the elderly against economic deprivation. As a first
step towards instituting pension reforms, Government of India moved from a defined benefit pension to
a defined contribution based pension system
• Tier-I account : This NPS account does not allow premature withdrawal and is available from 1 May
2009. In Tier I funds cannot be withdrawn before attaining 60 years. Maximum 60% can be withdrawn.
40% of the total balance available at the end of contribution year will have to be annuitized.
• Tier-II account : The tier-II NPS account permits withdrawal. Since 1 April 2008, the pension
contributions of Central Government employees covered by the National Pension System (NPS) are being
invested by professional Pension Fund Managers in line with investment guidelines of Government
applicable to non-Government Provident Funds. A majority of State Governments have also shifted to
the defined contribution based National Pension System from varying dates. 27 State/UT Governments
have notified the NPS for their new employees. No tax benefit in Tier 2 account.

2. Benefits of NPS
It is basically for people who do not have the benefit of pension after retirement from service. The
scheme gives an opportunity to the subscriber to build up his pension fund over a long period so that
after retirement he can draw pension for his sustenance.
Some of the benefits of the National Pension System (NPS) are:
• It is transparent - NPS is transparent and cost effective system wherein the pension contributions are
invested in the pension fund schemes and the employee will be able to know the value of the
investment on day to day basis.
• It is simple - All the subscriber has to do, is to open an account with his/her nodal office and get a
Permanent Retirement Account Number (PRAN).
• It is portable - Each employee is identified by a unique number and has a separate PRAN which is
portable i.e., will remain same even if an employee gets transferred to any other office.
•
Online Access with IPIN log in details. View of Pension fund managers.

3. Agencies
The various agencies in the scheme as under:
1. PFRDA( Controlling Body)
2. Bank of India( Trustee Bank)
3. NSDL( Central Recordkeeping Agency)
4. CRA- FC ( viz. KARVY)
5. POP( State Bank)
6. POP-SP( Branches)
Is Nomination facility available?
Yes and unlike in Bank’s account nominations can be made in favour of 3 persons.
How can funds be contributed?
Through Cash or Cheque. However credit to account in case of cheque can only be made available on
realization of the Cheque.
What is PRAN?
Permanent Retirement Account Number which will be given to the subscriber on opening the Tier I
account and which must be quoted in every transaction just like in case of bank account. As on 14th
August, 2013, the number of subscribers under NPS is 52.83 Lakh with a corpus of Rs. 34,965 crore.

4. • Withdrawals will be permitted from the individual pension account subject to the conditions, such as,
purpose, frequency and limits, as may be specified by the regulations.
• At least one of the pension fund managers shall be from the public sector.
Corporate benefit for employees: The employer can contribute 10%
of an employees salary towards NPS and the entire amount is tax
deductible under Sec 80CCD (2) without any monetary limit. In
addition, the employee, can claim tax benefit under Sec 80CCC (1)
upto a limit of Rs 1,00,000.

5. Investment Choice for Asset Allocation
The Corporate as well as Subscriber can have any of the two choices for their asset allocation:
Active Choice: Corporate/ Subscriber as the case may be will have the option to actively decide as to
how your NPS pension wealth is to be invested across Asset class E (upto 50%), Asset Class C & Asset
Class G.
OR
Auto Choice: 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 (which would change as
per age of subscriber). Table for Life cycle fund is given below
NOTE:
Asset Class E - Investment in predominantly
equity market instrument. Index based only.
Asset Class C - Investment in fixed income instruments
other than Government Securities
Asset Class G - Investment in Government Securities.

7. Annuity options on vesting.
The subscriber can purchase an annuity from any one of the PFRDA empanelled annuity service providers
as per his choice or selection of the annuity type. Currently, the Indian life insurers who act as Annuity
Service Providers provide the following type of annuities in India:
• Pension(Annuity) payable for life at a uniform rate to the annuitant only.
• Pension (Annuity) payable for 5, 10, 15 or 20 years certain and thereafter
as long as you is alive.
• Pension (Annuity) for life with return of purchase price on death of the
annuitant (Policyholder).
• Pension (Annuity) payable for life increasing at a simple rate of 3% p.a.
• Pension (Annuity) for life with a provision of 50% of the annuity payable to spouse
during his/her lifetime on death of the annuitant.
• Pension (Annuity) for life with a provision of 100% of the annuity payable to spouse
during his/her lifetime on death of the annuitant.
• Pension (Annuity) for life with a provision of 100% of the annuity payable to spouse
during his/her lifetime on death of the annuitant and with return of purchase price on
death of the spouse to nominee.

8. Charges
All the charges associated to Tier I account including Annual PRA Maintenance charge are paid by the
employer. In case of Tier II account, activation charge and transaction charges are paid by the subscriber.
The POP charges and the CRA charges are given in the table below:

9. Performance Parameters

10. Performance Parameters

11. Performance Parameters

12. Press Release
Returns on NPS Scheme 2012_2013

13. Panel Discussion

14. Retirement Solution options
Retirement Corpus Utilization

15. Quiz

16. Sources of Data
http://india.gov.in/spotlight/national-pension-system-retirement-plan-all
http://pfrda.org.in/
http://www.morningstar.in/posts/19360/debt-market-volatility-plays-spoiler-to-nps-returns.aspx
www.valuresearchonline.com
www.moneycontrol.com

17. Thank you for your time!
Dilshad Billimoria
Certified Financial Planner and Investment advisor.
Website: www.dilzer.net
Email: dilzerconsultants@gmail.com
Phone: 91.80. 41512337 / 91.80. 41136147
Linkedin: in.linkedin.com/in/dilshadbillimoria