a.Schemes
1.What is meant by Scheme Preference ?
Scheme Preference is the Pension fund
schemes option chosen by the subscriber
for investing the pension contribution
amount. At present, there is only one default scheme for Tier I.
The contribution of all the Subscribers will
be invested in this default scheme. In the default scheme, the contribution is
allocated to three PFMs, viz. SBI Pension Funds Private Limited, UTI Retirement
Solutions Limited and LIC Pension Fund Limited in a predefined proportion and
each of the PFMs will invest the funds in the proportion of 85% in fixed income
instruments and 15% in equity and equity related instruments.
For Tier II, the government subscriber has
been given the flexibility to choose one out of six Pension Fund Managers(PFMs)
and also the percentage in which the selected PFM will invest the funds.
The six PFMs are
ICICI Prudential Pension Funds Management
Company Limited
IDFC Pension Fund Management Company Limited
Kotak Mahindra Pension Fund Limited
Reliance Capital Pension Fund Limited
SBI Pension Funds Private Limited
UTI Retirement Solutions Limited
The three asset classes are
Equity (E), Corporate bonds (C) and
Government Securities (G). A subscriber choose Active Choice, he can specify
the percentage in which his / her money is to be invested in these asset
classes. However, allocation in Equity cannot be more than 50%. A subscriber
opts for Auto Choice, system will automatically calculate the asset allocation
percentages based on the subscriber's age.
2.What are the Assets permitted for NPS
funds Investment?
At present under Tier I, there is only one
scheme (default) available to Central/State Govt. employees under which 85% of
your money is invested in debt instruments and upto 15% in equity and equity
linked mutual funds.
Under Tier II, the sets of assets to be
considered for investment are segregated based on their risk{return
characteristics)
Asset class E : "High return, High
risk" (equity market instruments).
Asset class G : "Low return, Low
risk" fixed income instruments. The best example of this are central
government bonds.
Asset class C : "Medium return for
credit risk" bearing fixed income instruments. Examples of these are bonds
issued by firms.
3.How are the returns calculated in Tier I
and Tier II account ? Is there a assured return / div / bonus?
For Central Government employees mandatorily
covered under NPS, the total contribution uploaded in an employee's Tier I
account is divided among three PFMs. viz. SBI Pension Funds Private Limited,
UTI Retirement Solutions Limited and LIC Pension Fund Limited in a predefined
ratio and units are allotted in the subscribers account. For State Government
employees mandatorily covered under NPS, the total contribution uploaded in an
employee's Tier I account is divided among the three PFMs. viz. SBI Pension
Funds Private Limited, UTI Retirement Solutions Limited and LIC Pension Fund
Limited in a ratio as decided by the State Government and units are allotted in
the subscribers account accordingly. The PFMs invest the money in different
financial instruments within the investment guidelines laid down by PFRDA and
declare Net Asset Value(NAV) at the end of each business day. Accordingly,
based on the NAV units are credited in the subscriber's account. The present
value of the investment is arrived by the units held multiplied by the NAV.
In Tier II, the only difference is that the
subscriber can select any one of the 6 PFMs and can also select the ratio in
which his / her money is invested in one or more asset class viz. Equity,
Corporate Debt and Government Bonds.
The return under NPS is market driven.
Hence, there is no guaranteed/defined amount of return. The returns generated
through investments are accumulated and is not distributed as dividend or
bonus.
4. What is Net Asset Value (NAV)?
Also known as NAV, this is the price of one
unit of a fund. NAV is calculated at the end of every working day between
Monday and Friday. It is calculated by adding up the value of all the
securities and cash in the fund's portfolio (its assets), subtracting the
fund's liabilities, and dividing that number by the number of units that the
fund has issued. The NAV increases (or decreases) when the value of the fund's
holdings increase (or decrease). NAV of different PFMs may differ. Even the
different schemes under the same PFM will have different NAV.
5.How do I change my scheme preference?
Scheme Preference change option is not
available to Govt. subscribers for Tier I.
For Tier II, the subscriber has to submit
the physical application form (Form-UOS-S3) to
change Scheme Preference. However, such changes can be done only once in a
financial year. You can submit the request to your POP-SP through whom your
Tier II account is activated. Please collect a 17 digit acknowledgement number
against your request. The transaction is chargeable.
6.How do a subscriber track the status of
the change request?
Yes, subscriber can either check with their
POP-SP or can call at CRA's toll free number 1800 222 080 for the status of pending
request. Please mention the 17 digit acknowledgement number received from
POP-SP against your request.
7. Will I get any intimation for the
change in scheme preference?
CRA system will send an e-mail to the
Subscriber (if the email ID is available) once the request is processed.
8.How many times a subscriber has an option
to change his / her scheme preference?
At present, this facility is not available
for Tier I account of Central/state Govt. employee. In future, subscriber will
have the option of selection of PFM and Investment schemes (as and when PFRDA
approves it). For Tier II account, you can request for a change of scheme
preference once in a financial year.
9. What is Auto choice?
At present under Tier I, this facility is
not available for central/state govt. employees. In future, you will have
option to select your investment choice as and when PFRDA approves it. For Tier
II account, Govt. Employee can select his / her investment choice as auto
choice. Under this type of investment choice, investment will be made in a life
cycle fund in the schemes of Pension Fund Manager chosen by the subscriber. The
fraction of funds invested across three asset classes will be determined by a
Pre-defined portfolio.
10.What is Active choice?
At present under Tier I, this facility is
not available for central/state govt. employees. In future, subscribers will
have option to select your investment choice as and when PFRDA approves it. For
Govt Employee who opted for Tier II, under this type of investment choice,
subscribers have an option to choose a fund manager and provide the ratio in
which his / her funds to be invested among the asset classes.
11. What is Asset Class "E"?
At present under Tier I, this facility is
not available for central/state govt. employees. In future, subscribers will
have option to select your investment choice as and when PFRDA approves it. For
Govt Employee who opted for Tier II and selected active choice, three assets
class are there (E, C & G) Asset Class "E" are the Investments in
Equity shares. Money will be invested in index funds that replicate the
portfolio of a Particular index(Like BSE sensitive index and NSE nifty fifty
index.).Max investment in this class is 50% of total contribution.
12.What is Asset Class "G"?
At present under Tier I, this facility is
not available for central/state govt. employees. In future, you will have
option to select your investment choice as and when PFRDA approves it. For Govt
Employee who opted for Tier II and selected active choice, three assets class
are there (E, C & G). Asset Class "G" is the Asset Class of
lowest risk. The most natural candidates for lowest risk assets are bonds
issued by the Central Government { called GOI bonds. These bonds have no
default risk, and/or enormous depth for investments by pension funds.
13.What is Asset Class "C"?
At present under Tier I, this facility is
not available for central/state govt. employees. In future, you will have
option to select your investment choice as and when PFRDA approves it. For Govt
Employee who opted for Tier II and selected active choice, three assets class
are there (E, C & G). Asset Class "C" contains Bonds issued by
any Entity other than Central Government. Here, the issuers can be state
governments, municipal bodies, state government PSU/PSE like electricity
boards, and private corporations.
14. For Auto Choice, how do the
proportion of E, C and G change?
In Auto Choice, the proportion of E, C and G
is determined by the subscriber's age. At each birthdate of the subscriber, these
proportions are adjusted with age as mentioned in the life-cycle matrix.
15.What is rebalancing as per regulatory
requirement appearing in Statement of Transaction for Tier II account?
As mentioned in the offer document of PFRDA,
in case of subscribers who have opted 'Auto choice' investment option, the
percentage of investment in the asset classes E/C/G will change as per the age
of the subscriber as given in the 'Life cycle Investment Matrix'. The change
happens on the date of birth of the subscriber. In this process, asset
allocation ratio is changed and the existing assets are redeemed and reinvested
as per the new ratio of allocation.
b.Withdrawal
1.When and how can I withdraw the amount
from Tier I account?
Withdrawal of Tier I account: As per the
guidelines for withdrawal stipulated by Pension Fund Regulatory &
Development Authority (PFRDA)/Ministry of Finance(MOF), the subscribers can
exit form National Pension System (NPS) on his / her retirement, resignation or
death.
* Retirement : On attaining the age of 60
years, a subscriber would be required to invest minimum 40% of his / her
accumulated savings (pension wealth) to purchase a life annuity from any IRDA
(Insurance Regulatory and Development Authority) - regulated life insurance
company.
A subscriber may choose to purchase an
annuity for an amount greater than 40%. The remaining pension wealth can either
be withdrawn in a lump sum on attaining the age of 60 or in a phased manner,
between age 60 and 70, at the option of the subscriber.
* Resignation: On resignation of the
subscriber, 80% of the corpus has to be annuitized and the subscriber can
withdraw remaining wealth.
* Death : On death, the entire corpus of the
subscriber will be handed over to the nominee of the subscriber.
However, the operational procedures for the
withdrawal are yet to be finalized by PFRDA in consultation with MOF. Once they
are finalized the offices will be intimated about the same. The withdrawal
request should be routed through the associated PAO.
2.What is Annuity?
Annuity in the context of NPS refers to the
monthly sum that will be received by the subscriber from the Annuity Service
Provider after he attains the age of 60.
3. Who is the Annuity service provider?
Annuity Service Providers (ASPs) is the
entity who will be responsible for managing the funds (allocated for buying
annuity) and payment of the pension after a subscriber attains the age of 60.
The ASPs will be the entities regulated by IRDA. At present, ASP is not
appointed by PFRDA.
4.What happens if the subscriber dies after
attaining the age of 60?
The mode and manner of payment of amount (if
any available) will depend on the type of annuity plan / scheme selected by the
subscriber while buying the annuity.
5.How can I exit from NPS?
No employee/subscriber can exit from NPS
till he is mandatorily covered under NPS.
In case of death of the subscriber before
the age of 60, the nominee will receive the entire sum. In case of resignation
or voluntary retirement, please refer to the question on withdrawal.
6.What happens to my investments if I
discontinue the scheme?
A subscriber who is mandatorily covered
under NPS can not exit from NPS till he is employed.
In case of resignation or voluntary
retirement, please refer to the question on withdrawal.
7.What happens to the accumulated amount at
the time of death of the employee?
In the event of death of the
employee/subscriber, the nodal office will enter a withdrawal request in the
CRA system. After the request is processed, a cheque is issued favouring the
nominee and is despatched to the nodal office. In case no nominee is registered
in the CRA system, the cheque is issued favouring the associated PAO. In case
there are more than one nominee, the sum will be distributed to nominee in the
ratio as recorded in the system.
8.How do I redeem from Tier II account?
In order to withdraw from Tier II account,
the subscriber needs to submit a duly filled UOS-S12 to
the associated POP-SP. If the request is entered and authorised in CRA system
by the POP/POP-SP before 1.30 PM, then it goes for same day's processing, or
else it goes for the next business day. The redemption amount may vary due to
the variation of NAV. Units are redeemed based on the NAV declared at the end
of the processing day. On T+3 days, (T being the date of processing) the funds
are transferred from the Trustee Bank to subscriber's bank account as
registered in the CRA system.
c.Charges
What is the charge structure in NPS?
c.Charges
What is the charge structure in NPS?
In case of government subscribers, all the
charges associated to Tier I account including Annual PRA Maintenance charge
are paid by the employer. Tier II activation charge and transaction charges for
Tier II is paid by the subscriber.
The POP charges and the CRA charges are
given in the table below. For details of other charges, please refer to the
offer document.
(link to offer document)
(link to offer document)
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*Service tax and other levies, as
applicable, will be levied as per the existing tax laws.
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1 CRA had reduced Annual Maintenance
Charges (AMC) from Rs. 350 to Rs. 280 and Transaction Charges from Rs. 10 to
Rs. 6 once the number of accounts (PRANs) crossed 10 lakhs. It was committed
to reduce the charges once the number of accounts reaches 30 lakhs. However,
with commendable increase in the number of subscribers in a short span of one
year, CRA has reduced the AMC by almost 20% to Rs. 225 and Transaction
Charges by more than 16% to Rs.5 even before reaching the milestone.
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How are the charges calculated and
deducted from my account?
CRA charges for Tier II account are deducted
from the subscriber's account as on the last day of the calendar quarter. The
billing cycle is 3 months i.e., 26th of the last month of the previous quarter
to 25th of the last month of the current quarter.
Lets assume, for the quarter ending
September 2010 (billing cycle is June 26th to September 25th , 2010), for a
PRAN, following are the applicable charges : Charge for 10 Transaction - Rs. 50
Service Tax including Education Cess - Rs.
5.52
Total Charges - Rs. 55.52
The value of holding of the subscriber as on
September 29, 2010 is Rs. 10000 i.e., E - Rs.5000 (50%); C -Rs. 3000 (30%) and
G - Rs. 2000 (20%).
The charges of Rs. 55.52 will be recovered
in the ratio of holdings
Recovery
E - 50% of Rs.55.52 = Rs. 27.76
C - 30% of Rs. 55.52 = Rs. 16.65
G - 20% of Rs. 55.52 = Rs. 11.10
Lets assume that as on September 29, 2010,
NAV for asset class E, C and G is 13, 12 and 11 respectively.
Units redeemed from E - 27.76/13 = 2.1353
Units redeemed from C – 16.65/12 = 1.3875
Units redeemed from G – 11.10/11 = 1.0090
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