Everyone has to get retired from the work no matter what is your work profile either you are Govt. employee, or a businessman or a private firm employee. Each of us makes plans for the retirement. The planning of retirement is not always easy as you have to look in various aspects of financial plan like tax benefits, returns and risk. The task becomes more confusing when you have many options to invest.
Here in this article we have tried to give details about one of the Retirement/Pension plan available in country and to compare it with some of the other schemes.
What is NPS?
This a pension scheme introduced by Govt. of India where you can regularly invest in this scheme and get a lump-sum at your retirement and it gives fixed monthly income for the lifetime.
Before the introduction of the NPS pensions schemes were available to Govt. employees and employees of big companies who had provident fund facility. But with NPS now its a common person gateway to Pension Schemes.
Who can Join New Pension Scheme?
All citizens of India can avail and be part of this scheme on voluntary basis and its mandatory for the Central Govt. Employees. All Indian citizens between the age of 18 to 55 can join this scheme.
How can one enroll for NPS?
To enroll for NPS one have to visit Point of Presence( PoP) and fill up the prescribed form with the required documents.
Once Applicant is registered with, the Central Recordkeeping Agency ( CRA) will send a Permanent Retirement Account Number(PRAN).
What is Investment Limit?
Who are the Bodies related to New Pension Scheme
To enroll for NPS one have to visit Point of Presence( PoP) and fill up the prescribed form with the required documents.
Once Applicant is registered with, the Central Recordkeeping Agency ( CRA) will send a Permanent Retirement Account Number(PRAN).
What is Investment Limit?
- No upper limit of investment.
- Minimum limit of 6000 per year ( Rs. 500 per month)
- Minimum number of contribution : 4 in an year ( at least 1 in each quarter)
- Minimum Annual contribution: Rs. 6000 in each subscriber account.
Who are the Bodies related to New Pension Scheme
Regulator: The one who will regulate the NPS System.
Fund Managers: Who will invest the money?
Point of Presence: Responsible for Sales and Marketing.
Central Record Keeping Agency: Responsible for all the document Keeping work (Record Keeper)
Who regulates NPS?
The regulator for New Pension Scheme in India is Pension Fund Regulatory and Development Authority (PFRDA). It monitors and regulates all activities under NPS. It functions same like SEBI in Stock Market and its checks how money is invested and it keep track on the working of fund managers.
Who are fund managers?
Fund managers for NPS are appointed by Govt. of India to manage funds of investors. They are one who will take decisions regarding where the money received under NPS should be invested in the best possible way considering all the rules and regulations set by PFRDA. Some of the fund managers are as SBI Pension Funds Private Limited, UTI Retirement Solutions Limited and ICICI Prudential Pension Funds Management Company Limited etc.
Point of Presence
These are the Banks and Financials institutes approved by Govt. Of India as Point of Presence under the NPS for all Indian citizens other than Government employees under NPS. These Point of Presence facilitated to get registered with NPS.
Central Record Keeping Agency (CRA)
It is the body who maintains and records all the transactions and contributions of the subscribers. It will also have the mandate to effect client instructions regarding switching from one fund to another or from one scheme to another of the same fund.
What are the Investment Options in NPS?
This question is very much on the top of the mind of the Investor while making an investment in NPS. So the answer to this question is here
There are 3 separated schemes each investing in different asset class which are managed by Fund Managers under the investment guidance finalized for NPS. The asset classes to be invest are equity, risk bearing financial instruments and government securities. It’s the decision of investor about the proportions of investment in these three assets classes
G Class: Investment would be in Government securities like GOI bonds and State Govt. bonds
C Class: Investment would be in fixed income securities other than Government Securities
E Class: Investment would primarily in Equity market instruments. It would invest in Index funds that replicate the portfolio of either BSE Sensitive index or NSE Nifty 50 index.
If no choice is exercised by the subscriber the contribution will be invested in accordance with Auto choice in which investment will be determined by a predefined portfolio.
What are the benefits of NPS?
New Pension Scheme is beneficial to the Private Firm employees as before NPS there were restrictions in investing in Pensions Schemes. At the same time its gives various benefits to the subscribers/investors as
The money charged by fund managers is very less then compared to charges levied by mutual funds or other investment options.
Now you are very much aware of NPS tell me explain you some of the traditional retirement plans like
Public Provident Funds
All of us have come across the term Public Provident Fund.PPF is a long term small savings scheme backed by Govt. of Indiastarted with the objective of providing old age income security to the workers in the unorganized sector and self-employed individuals.The minimum deposit in 500/- and maximum is Rs. 70,000/- in a financial year and the scheme is for 15 years.
National Savings Certificate
National Savings Certificates are long- term savings instruments which provides adequate returns with high safety. These NSC not only saves tax but at the same time make an investment which provides good and safe returns. You can get NSC from any Post Office nearby you and NSC are available in the denominations of Rs. 100 Rs 500, Rs. 1000, Rs. 5000, & Rs. 10,000. There is no maximum limit on the purchase of the certificates. And the maturity period for NSC is 6 years.
Fund Managers: Who will invest the money?
Point of Presence: Responsible for Sales and Marketing.
Central Record Keeping Agency: Responsible for all the document Keeping work (Record Keeper)
Who regulates NPS?
The regulator for New Pension Scheme in India is Pension Fund Regulatory and Development Authority (PFRDA). It monitors and regulates all activities under NPS. It functions same like SEBI in Stock Market and its checks how money is invested and it keep track on the working of fund managers.
Who are fund managers?
Fund managers for NPS are appointed by Govt. of India to manage funds of investors. They are one who will take decisions regarding where the money received under NPS should be invested in the best possible way considering all the rules and regulations set by PFRDA. Some of the fund managers are as SBI Pension Funds Private Limited, UTI Retirement Solutions Limited and ICICI Prudential Pension Funds Management Company Limited etc.
Point of Presence
These are the Banks and Financials institutes approved by Govt. Of India as Point of Presence under the NPS for all Indian citizens other than Government employees under NPS. These Point of Presence facilitated to get registered with NPS.
Central Record Keeping Agency (CRA)
It is the body who maintains and records all the transactions and contributions of the subscribers. It will also have the mandate to effect client instructions regarding switching from one fund to another or from one scheme to another of the same fund.
What are the Investment Options in NPS?
This question is very much on the top of the mind of the Investor while making an investment in NPS. So the answer to this question is here
There are 3 separated schemes each investing in different asset class which are managed by Fund Managers under the investment guidance finalized for NPS. The asset classes to be invest are equity, risk bearing financial instruments and government securities. It’s the decision of investor about the proportions of investment in these three assets classes
G Class: Investment would be in Government securities like GOI bonds and State Govt. bonds
C Class: Investment would be in fixed income securities other than Government Securities
E Class: Investment would primarily in Equity market instruments. It would invest in Index funds that replicate the portfolio of either BSE Sensitive index or NSE Nifty 50 index.
If no choice is exercised by the subscriber the contribution will be invested in accordance with Auto choice in which investment will be determined by a predefined portfolio.
What are the benefits of NPS?
New Pension Scheme is beneficial to the Private Firm employees as before NPS there were restrictions in investing in Pensions Schemes. At the same time its gives various benefits to the subscribers/investors as
The money charged by fund managers is very less then compared to charges levied by mutual funds or other investment options.
- Investment in NPS is highly safe and it contains very less amount of risk.
- New Pension Scheme provides high returns compare to other investment options.
- It provides tax benefits under 80c section of income tax.
Now you are very much aware of NPS tell me explain you some of the traditional retirement plans like
- Public Provident Funds
- National Savings Certificate-
Public Provident Funds
All of us have come across the term Public Provident Fund.PPF is a long term small savings scheme backed by Govt. of Indiastarted with the objective of providing old age income security to the workers in the unorganized sector and self-employed individuals.The minimum deposit in 500/- and maximum is Rs. 70,000/- in a financial year and the scheme is for 15 years.
National Savings Certificate
National Savings Certificates are long- term savings instruments which provides adequate returns with high safety. These NSC not only saves tax but at the same time make an investment which provides good and safe returns. You can get NSC from any Post Office nearby you and NSC are available in the denominations of Rs. 100 Rs 500, Rs. 1000, Rs. 5000, & Rs. 10,000. There is no maximum limit on the purchase of the certificates. And the maturity period for NSC is 6 years.
Comparison between NPS and other traditional Retirement Plans
| Basis | New Pension Scheme(NPS) | Public Provident Fund (PPF) | National Savings Certificate (NSE) |
Minimum Investment | 500/- per month | 500/- per year | 100/- per month |
Maximum Investment | No upper limit | 70000 per year | No upper limit |
Entry Age | 18-55 years | No age prescription | Min. 18 years |
Maturity period | Till the age of retirement(60) | 15 years | 6 years |
Rate of return | 12-14% p.a.(approx) | 8% p.a.(approx) | 8%p.a(approx) |
Prematurity withdrawal | Permissible with certain terms | Permissible in the case of death only | Permissible in certain circumstance such as death. |
Nomination facility | Available | Available | Available |
Tax benefits | Contributions and returns to the NPS are exempt up to a limit, withdrawals are taxed as normal income | Deposits in PPF qualify for rebate under section 80-C of Income Tax Act. | It is quality as investment under 80C section of Income tax |
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