NPS Lite - India Infoline Finance Limited
NPS Lite - India Infoline Finance Limited
NPS Lite - India Infoline Finance Limited
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A simple but effective way to plan your retirement<br />
<strong>NPS</strong> <strong>Lite</strong> offers <strong>India</strong>n citizens a lowcost<br />
option for planning their<br />
retirement<br />
Earlier to provide old age income,<br />
PFRDA (Pension Fund Regulatory and<br />
Development Authority) had<br />
introduced National Pension System<br />
(<strong>NPS</strong>). An online facility, <strong>NPS</strong> provides<br />
a subscriber access to two personal<br />
accounts: Tier-I pension account &<br />
Tier-II savings account.<br />
In Tier-I pension account, you will contribute your savings for retirement into this<br />
non-withdrawal account. Tier-II savings account is simply a voluntary savings<br />
facility. You will be free to withdraw your savings from this account whenever you<br />
wish.<br />
On the other hand, <strong>NPS</strong> <strong>Lite</strong> is launched for people belonging to low income group so<br />
that they can plan for their retirement even with small investment amount of Rs. 100<br />
per month. An offline service, <strong>NPS</strong> <strong>Lite</strong> is designed to ensure very low administrative<br />
and transactional costs for investors. Both <strong>NPS</strong> & <strong>NPS</strong> <strong>Lite</strong> provide Swavalamban<br />
(self reliance) benefits.<br />
As said earlier, <strong>NPS</strong> <strong>Lite</strong> offers <strong>India</strong>n citizens a low-cost option for planning their<br />
retirement. The Scheme generally offers 8.5%-9% returns per annum, depending on<br />
the fund performance. At the end of the tenure (retirement), 60% of the corpus can<br />
be withdrawn from <strong>NPS</strong> <strong>Lite</strong> and the remaining 40% will be invested in an annuity<br />
provided by insurance companies. A subscriber cannot withdraw the entire corpus at<br />
the end of the tenure. He has to buy an annuity which will be at least 40% of the<br />
total corpus. Pension will be given to the subscriber on a monthly basis based on<br />
annuity scheme chosen at the time of retirement. Withdrawal amount will be sent<br />
directly to the subscriber’s bank account. However, <strong>NPS</strong> <strong>Lite</strong> account does not<br />
provide liquidity.<br />
Benefits of ‘<strong>NPS</strong> <strong>Lite</strong>’<br />
<strong>NPS</strong> <strong>Lite</strong> is portable. You can operate your account from anywhere in the<br />
country, even if you change your city, job or your aggregator.<br />
<strong>NPS</strong> <strong>Lite</strong> is safe. It is regulated by PFRDA, with transparent investment norms<br />
and regular performance review of fund managers by <strong>NPS</strong> Trust.<br />
Tax benefit up to Rs. 1 lakh is available under section 80 CCD.<br />
<strong>NPS</strong> Trust<br />
PFRDA has established the <strong>NPS</strong> Trust under <strong>India</strong>n<br />
Trust Act, 1862 and appointed <strong>NPS</strong> Board of Trustees<br />
in whom the administration of the National Pension<br />
System vests under <strong>India</strong>n Law. The Trust is<br />
responsible for taking care of the funds under the<br />
<strong>NPS</strong>. The Trust holds an account with the Bank of<br />
<strong>India</strong> and this bank is designated as the <strong>NPS</strong> Trustee<br />
Bank.
How can I open an <strong>NPS</strong> <strong>Lite</strong> account?<br />
Opening an <strong>NPS</strong> <strong>Lite</strong> account is very simple. You need to fill the <strong>NPS</strong> <strong>Lite</strong> form and<br />
provide the required documentation along with a minimum investment amount of Rs.<br />
100 to the authorised aggregator approved by PFRDA. You can also download the<br />
application form from the PFRDA website or Payment can be made in cheque or<br />
cash. The account has to be opened in the name of an individual. It cannot be<br />
opened in joined names. Subscriber can nominate a maximum of three nominees.<br />
Pankaaj Maalde, head-financial planning, ApnaPaisa.com, said, “Any individual<br />
between 18 years to 60 years who is citizen of <strong>India</strong> can enroll in <strong>NPS</strong>. Even an NRI<br />
can enroll for <strong>NPS</strong>. However, Hindu Undivided Family is not allowed to invest in<br />
<strong>NPS</strong>.”<br />
Documents to be submitted include two photo copies of identity proof and address<br />
proof and a recent passport size photo. Identity proof documents would include your<br />
PAN (permanent account number) card, ration card, voter’s ID card, etc. Address<br />
proof documents consists of driving license, passport, electricity bill, telephone bill,<br />
bank account statement, rent receipt and credit card statement among others. These<br />
copies should be self attested. The forms are to be mandatorily filled in black pen.<br />
What is PRAN?<br />
The PRAN (Permanent Retirement Account Number) card will be issued to each<br />
subscriber on the registration of his <strong>NPS</strong> <strong>Lite</strong> account.<br />
The PRAN card is a document with PRAN No, subscriber’s name, father’s name,<br />
photograph and signature/thumb impression. The Card is issued by Central<br />
Recordkeeping Agency i.e. NSDL (National Securities Depository Ltd). A subscriber<br />
can hold only one PRAN card. The PRAN card will be unique, permanent and<br />
portable. The subscriber will get the PRAN card within 20-30 days after the<br />
submission of documents. A subscriber cannot open two different accounts in similar<br />
name. In case of rejection of application, the amount is refundable.<br />
What is the role of an aggregator?<br />
Entities approved by PFRDA would be acting as aggregator in <strong>NPS</strong> <strong>Lite</strong> for their<br />
subscribers. Aggregator performs functions relating to registration of subscribers,<br />
undertaking KYC (know your customer) verification, receiving contributions and<br />
instructions from subscribers and transmission of the same to designated <strong>NPS</strong> <strong>Lite</strong><br />
intermediaries.<br />
Opening an <strong>NPS</strong> account is very simple. All you have to do is open an account<br />
through your Aggregator and get a PRAN. List of aggregators appointed website.<br />
Investment amount<br />
There are no lower & upper limits to the number of contribution per year. The<br />
subscriber is free to manage the frequency and amounts of contributions. However,<br />
more than 12 transactions in a year will cost you Rs. 5 per transaction.<br />
Swavalamban scheme<br />
There is no minimum investment requirement each year, however minimum of Rs.<br />
1,000 contribution per year is recommended. Those desirous of availing<br />
Swavalamban scheme of the government must invest at least Rs. 1,000 during the<br />
year so that they can get government contribution of Rs. 1,000 in the account each
year. This additional benefit is available to <strong>NPS</strong> <strong>Lite</strong> subscribers opting for<br />
Swavalamban Scheme Benefit. The Scheme is valid till FY 2016-17 and may be<br />
extended thereafter.<br />
Pravin Chordia, product manager-financial products division, <strong>India</strong> <strong>Infoline</strong>, “Under<br />
Swavalamban scheme, the government contributes Rs. 1,000 per annum for next<br />
five years. The scheme is applicable only for individuals investing from Rs. 1,000 to<br />
Rs. 12,000 per annum. If a subscriber invests Rs. 100 per month, still the<br />
government will contribute Rs. 1,000 each year for five years. However, if the<br />
subscriber invests above Rs. 1,000 per month, even then the government would pay<br />
Rs. 1,000. But, if any investment is above Rs. 12,000 per year then that account will<br />
not receive government contribution of Rs. 1,000.”<br />
Charges<br />
The account opening charges are charged only once at the time of the registration<br />
and annual maintenance charges are charged every year.<br />
.<br />
Pension Fund Managers<br />
The appointed pension fund managers (PFMs) would manage the retirement savings<br />
of subscribers under the <strong>NPS</strong> <strong>Lite</strong>. The PFMs are required to invest strictly in<br />
accordance with guidelines issued by the government/PFRDA. The aggregators may<br />
choose one of the PFMs to whom the entire corpus can be entrusted.<br />
Details of pension fund manager<br />
ICICI Prudential Pension Funds<br />
IDFC Pension Fund<br />
Kotak Mahindra Pension Fund<br />
Reliance Capital Pension Fund<br />
SBI Pension Funds<br />
UTI Retirement Solutions<br />
Withdrawal<br />
If you want to withdraw before 60 years of age, you would be required to invest at<br />
least 80% of the pension wealth to purchase a life annuity from any IRDA–regulated<br />
life insurance company. Rest 20% of the pension wealth may be withdrawn as lump<br />
sum.<br />
On attaining the age of 60 years, you would be required to invest minimum 40% of<br />
your accumulated savings (pension wealth) to purchase a life annuity from any<br />
IRDA-regulated life insurance company. You may choose to purchase an annuity for<br />
an amount greater than 40%. The remaining pension wealth can either be withdrawn<br />
in a lump sum on attaining the age of 60 or in a phased manner, between age 60<br />
and 70, at the option of the subscriber. In case of death of a subscriber the entire<br />
accumulated wealth can be made payable to the nominee. The nominee has to<br />
contact the aggregator and submit necessary documents such as death certificate,<br />
identity proof, etc.<br />
There are around six types of pension schemes that a subscriber can opt at the time<br />
of retirement or at the time buying annuity. No cash transaction is permitted at the<br />
time of pension. You have to inform your bank details to the aggregator at the time<br />
of buying the annuity. The pension amount will be directly transferred to your<br />
account through NEFT. This is in interest of the subscriber.
Annuity service providers<br />
Subscribers to <strong>NPS</strong> <strong>Lite</strong> can choose their annuity schemes from six annuity<br />
service providers on their exit from <strong>NPS</strong> on attainment of 60 years of age.<br />
Life Insurance Corporation of <strong>India</strong><br />
SBI Life Insurance<br />
ICICI Prudential Life Insurance<br />
Bajaj Allianz Life Insurance<br />
Star Union Dai-ichi Life Insurance<br />
Reliance Life Insurance<br />
Subscribers can choose from any of the six above mentioned annuity service<br />
providers and can also make their choice of the annuity scheme from<br />
amongst the schemes being offered by these providers.<br />
Annuity service providers would be responsible for delivering a regular<br />
monthly pension to the subscribers for the rest of their life.<br />
In case of any queries, readers can contact: nps@indiainfoline.com