Details of New Pension Plan 2009 (NPS) of Govt of India, PFRDA

The New Pension Scheme (NPS) has been launched on ‘Labour Day’ on Friday for all the citizens.

This followed the confirmation by the National Interim Pension R

egulator of the scheduled launch of the Mega Pension Plan from Friday. This scheme will be for for employees of private sector, self employed and extended it to everyone in the country. The Pension Fund Regulatory Development Authority (PFRDA) has decided to bring in some changes in the new pension scheme with effect from May 1, 2009.

 

The new pension scheme(NPS) will allow the fund investment of nearly 50% in the high risk stock markets. Six major fund managers were shortlisted for the new pension scheme in the month of February. They include Reliance Capital,ICICI Prudential Life Insurance,State Bank of India,Kotak Mahindra Bank,UTI,IDFC. An expert panel was formed under the guidance of HDFC chairman Deepak Parekh to look into the matters of new pension scheme.

The PFRDA has made a strict limit of investment of only 50% in the stock markets of the pension funds. Even the default choice where the persons do not take any call on the percentage of their funds to go into the stock markets will have a cap of maximum 50%. The board has said that the cap would be reviewed a year later and appropriate decision would be taken in this regard.

Some Important points of New Pension Scheme (NPS)

• There will be two different accounts

1. Tier 1- Pension A/c: This a/c will be non withdraw able & one can contribute their  savings. Its available from May 1^st 2009.
2.  Tier 2- Savings A/c: This will be a voluntary savings facility & one will be able to withdraw from this account anytime. Its launch date will be notified by PFRDA shortly.
   

• NPS accounts to be opened by authorized branches of several providers called points of presence.
• Registration forms and the process to receive the welcome KIT with Permanent Retirement account Number (PRAN).
• PRAN will remain same throughout the life of the individual.
• The percentage of money to be invested into equity will depend on the individual and will not exceed 50% of the total corpus.
• One can choose the fund manager to handle the NPS.
• In case one doesn’t choose it will go on Auto Choice Option.
• In case one doesn’t choose the allocation then Auto allocation of 50% into equity applies.
• Usual tax benefit given to pension plan applies to NPS too.
• Age grop allowed is 18-55 years.
• First contribution has to be made when one applies the first time to NPS.

1. Min amount per contribution is Rs 500.
   
2. Min amount per year Rs 6000.
   
3. Min number of contributions per year is 4.
   

• NAV will be declared on a regular basis.
• The PRAN Account will be closed if the citizenship of the individual changes.

When can one get the money out?

• At any point in time before 60 years.

1. Here you would be required to invest at least 80% of the pension wealth to purchase a life annuity from IRDA – regulated life insurance company. Rest 20% of the pension wealth may be withdrawn as lump sum.

• On attaining the age of 60 years & up to  70 years:

1. You may choose to purchase an annuity from any IRDA regulated life insurance company for a minimum amount of 40 % or greater. The remaining pension wealth can either be withdrawn as lump sum on attaining the age of 60 or in a phased manner, between age 60 and 70.

• Death due to any cause:

1. In such an unfortunate event, option will be available to the nominee to receive 100% of the NPS wealth as lump sum.

What are the charges one has to pay for the NPS?

Following are the point of presence outlets: (POP)

Allahabad Bank, Axis Bank, Central Bank Of India, Citibank, CAMS, ICICI Bank, IDBI Bank, IL&FS, KOtak Mahindra, LIC, Oriental Bank of Commerce, Reliance Capital, State bank of Bikaner & Jaipur, SBH, SBI, State Bank of Indore, SBM, SBP, SBT, The South Indian Bank, UBI, UTI Asset Management Company Ltd.