National Pension System (NPS)

1. National Pension System(NPS) Pension Fund Regulatory and Development Authority PFRDA, ChhatrapatiShivajiBhawan , B-14/A , Qutub Institutional Area, New Delhi-110016

2. NPS Please tell us what you know about NPS ( Take 5 pts) Benefits Concern- Uploading process Product Features ETC

3. National Pension System National Pension System (NPS) NPS is a defined contribution pension scheme ,mandatory for all employees joining services of Central Government (except Armed Forces) and Central Autonomous Bodies on or after 1st January 2004. PRAN Each subscriber’s NPS account is identified through unique 12 digit Permanent Retirement Account Number (PRAN). Contributions In NPS, both employer and employee contribute 10% of Basic Salary & Dearness Allowance (DA) every month to employee’s PRAN

4. Types of Accounts Tier-I account: Income Tax benefits as per IT Act, 1961 available for both employer and employee contributions. Tier-II account:. Tax benefits are not available. An active Tier I account will be a pre requisite for opening of a Tier II. Note : *Total Corpus of Rs.2000/- is required at the end of Financial Year.

5. We discussed the type of accounts • Lets visit the uploading process

6. Process of uploading of NPS contributions Prepares the salary bills of employees associated with him Consolidates salary bills received from the underlying DDOs. PAO will upload Subscriber Contribution File (SCF) in National Pension System Contribution Accounting Network (NPSCAN) and remit the NPS contributions to the Trustee Bank

7. NPS Architecture PFRDA PrAO/Directorate NPS Trust Fund Flow Trustee Bank Axis Bank Ltd Custodian (SHCIL) N P S C A N PFM (SBI) PFM (UTI) PFM (LIC) CRA (e-NSDL) PAO/DTO NAV DDO Annuity Service Providers Over Internet Subscriber Information Flow Funds Flow

8. Functions of uploading offices with the active support of DDOs:

9. Role & Responsibilities of DDOs : • 1. Timely registration of subscribers under NPS: Collecting and forwarding the registration form as soon as employee joins the services • Registration of subscriber :Scrutiny of registration form and ensuring the following before forwarding the same : • Name should be as per service records. • Date of joining . • Date of birth. • Filling of phone numbers & email ids. • Ensure the nomination column filled by subscribers. • 3. DDOs have to prepare salary bill and ensure that that should reach to PAO by 20th of every month. • 4.Handling of subscriber’s request related to modifications in data like nomination change , other personal details etc. • 5.Processing of exit cases : Before sending withdrawal requests to PAOs, DDOs have to ensure that enclosed KYC documents and bank details are as per subscriber’s name . • 6. Grievances Handling ; Providing inputs to associated PAO to resolve the grievances. Forwarding grievances received by them ,if it not able to resolve the same . • 7. Login facilities have been extended to DDOs in the CRA system .

10. As the roles and responsibilities are clear we will now understand the process for ID generation

11. Process to obtain user id and password by DDOs • The DDOs can login the CRA system using User ID & I-PIN (password). The status of DDO should be active in CRA system. • The registration number allotted by CRA to the DDOs followed by ‘00’ to be used as User ID. • The DDOs can generate their I-PIN by capturing a request through instant reset option in the CRA system (www.cra-nsdl.com) and getting it authorized by their associated Nodal Office (PAOs/DTOs).(For details see next slide)

12. Process for password generation • The DDOs are required to access CRA website (www.cra-nsdl.com) and click on the specified hyperlink on home page to generate instant I-PIN. • Two options will be made available to the User as shown below: • Reset Password using secret question • Instant Reset I-PIN • The User is required to select ‘Instant Reset I-PIN’ The User is then required to provide the DDO Registration number followed by two zeros (e.g. if DDO Reg is ‘ABC012345D’ then the User ID would be ‘ABC012345D00’) and click on ‘submit’. • The User is required to provide some basic information like DDO registration number, name of the person, designation etc., and submit the details. The DDO is required to provide registered email ID and also email ID for PIN mailer, which will be an additional email ID. The registered email ID and additional email ID may be same. • CRA system will display a confirmation screen which the User is required to confirm. • Once the request is confirmed, an Acknowledgement number is generated. The print of the Acknowledgement needs to be taken and the same needs to be submitted to the associated Nodal Office for authorizing the request of reset of IPIN. • The DDO User can login and access the CRA system once the request is authorized by the mapped Nodal Office.

13. NPS –Roles of Intermediaries Pension Fund Regulatory and Development Authority (PFRDA) . PFRDA is the regulator for NPS. NPS Trust The NPS Trust has been set up and constituted for taking care of the assets and funds under the National Pension System (NPS) in the interest of the beneficiaries (subscribers). Monitors the operations of other intermediaries Central Recordkeeping Agency (CRA) The recordkeeping, administration and customer service functions for all subscribers of the NPS Point of Presence (POP) and Aggregators Are different financial Institutions who acts as the first points of interaction for the NPS subscriber. They act as collection and distribution arms and provide customer service Pension Fund Managers Generate and maximise returns on investments of subscribers Custodian Takes care of the assets purchased by the Fund managers Trustee Bank Manages the fund flow and banking operations. It receives NPS funds from all Nodal Offices and transfers the same to the Pension Funds /  Annuity Service Providers/other intermediaries as per the operational guidelines. Annuity Service Providers (ASPs) Deliver a regular monthly pension to the subscriber after he/she exit from the NPS.

14. Intermediaries and their role ahs been discussed do note down any queries if at all

15. Investment Pattern for Government Sector Govt. of India notification No.: F.No.5 (88)/ 2006-PR dated 14th August 2008 & PFRDA circular –PFRDA/2014/2/PFM/1 dated 29-01-2014. All the State Governments are also following the same investment pattern at their own volition: Three funds managers -- SBI Pension Fund , UTI Retirement solution , and LIC Pension Fund.

16. Charges (Exclusive to Service Charges) NPS Charges * w.e.f 01-07-2013

17. Benefits of NPS Unique PRAN is unique in number Benefit of Low Cost The pension wealth accumulates over a period of time till retirement; and the account maintenance charges being low, larger would be the eventual benefit of the accumulated pension wealth Tax Benefits Benefits available under Section 80 CCD(1) ( upto 1.50 lacs) , 80 CCD(2) (10% of salary without any monetary limit) and exclusive benefit over and above 1.5 L limit under sec 80 CCD(1B) upto 50K as per relevant sections of Income Tax Act 1961, as amended from time to time. Protection of subscriber’s interest Regulated by the Pension Fund Regulatory & Development Authority (PFRDA) and introduced by the Government of India( through 15 regulations so far) Transparency Through online access to your pension account. Portability Across all geographical locations and employments across India.

18. Unique tax benefit for NPS Additional Tax benefit of Rs. 50,000 u/s 80 CCD (1B) Under NPS contributions & returns are exempted under tax during the accumulation. On superannuation or exit the annuitised amount (a minimum of 40%) and lupsum withdrawal upto 40% are tax free withdrawals ( only 20% ) are taxed as per prevailing tax rate slabs. 18

19. Grievance redressal-Escalation Matrix for Subscriber A subscriber can approach …. * Acknowledgement is generated in 3 working days. Unique grievance number is allotted. If the complaint pertains to other intermediary, the same is transferred within 3 working days. Any failure on the part of intermediary under NPS or any other pension scheme to follow the above-mentioned procedures and time-frames would attract penalties in addition to any compensation payable.

20. Partial Withdrawals from NPS before Exit Withdrawal not to exceed twenty-five percent (25%) of the contribution made by the subscriber in his PRAN . Permitted under the following conditions only: a) For Higher education of children including a legally adopted child. b ) For the marriage of his/her children, including a legally adopted child. c ) For the purchase/construction of residential house or flat. In case, the subscriber already owns either individually or in the joint name a residential house or flat, other than ancestral property, no withdrawal under these regulations shall be permitted d) Treatment for prescribed illnesses – suffered by subscriber, his legally wedded spouse, children including a legally adopted child and dependent parents. The above withdrawal shall be subject to the condition that: a ) Minimum vesting period: 10 years from the date of joining NPS b) Maximum no of withdrawals permitted :3 Not less than a period of 5 years should have elapsed from the last date of such withdrawal. However, the mandatory requirement of 5 years having elapsed between two withdrawals shall not apply in case of “treatment for prescribed illnesses” or in case of Withdrawal arising out of exit from National Pension System due to the death of the subscriber . Guidelines on the partial withdrawal has been issued vide circular no- PFRDA/20016/7/exit /2 dated 21-03-2016 : NPS subscriber needs to submit the Form – PW – 601 with the required documents

21. Exits /Withdrawals on Death/Pre-mature and Superannuation Online Processing of Exit Request of the Subscriber has been made mandatory from 1st April 2016.

22. Exits and Withdrawals Under the National Pension System Stoppage of last three months deductions- • Contributions deductions under the NPS made by the employers from the salary of subscribers shall be stopped at least 3 months prior to the date of superannuation. The employer shall settle directly the last three months contributions at their end with the concerned employee. • A subscriber seeking withdrawal from Tier-I account of the NPS shall provide Bank details mandatorily in the withdrawal form in order to receive credit of the NPS claim amount directly in to their Bank account. • For a subscriber, exiting from Tier-I account under the NPS, the amounts lying in the Tier-II account shall also be monetized and closed simultaneously upon payment of the eligible benefit

23. Benefits Process • Withdrawal Process • Grievance process was elaborated please note any cases you may want to discuss at the end of this session

24. Nomination A subscriber, at the time of joining the National Pension System is required to make a nomination mandatorily For the purpose of nomination referred above, the ‘family’ means • In the case of a male subscriber, his legally wedded wife, his children, whether married or unmarried, his dependent parents and his deceased son’s widow and children: • in the case of a female subscriber, her legally wedded husband, her children, whether married or unmarried, her dependent parents, her husband’s dependent parents and her deceased son’s widow and children: • If a subscriber has a family at the time of making a nomination, then any nomination made by such subscriber in favour of a person not belonging to his family shall be invalid. • A fresh nomination shall be made by the subscriber on his marriage and any nomination made before such marriage shall be deemed to be invalid. • If at the time of making a nomination the subscriber has no family, the nomination may be in favour of any person or persons • Where the nomination is wholly or partly in favour of a minor, the subscriber may appoint a major person of his family, to be the guardian of the minor nominee in the event of the subscriber predeceasing the nominee and the guardian so appointed.

25. Features released recently for NPS Subscribers • Mobile App- is available on ‘Google Play Store’ as ‘NPS by NSDL e-Gov’. The following features are available to the Subscribers in Mobile App: • Transaction Statement • Account details view • Statement of Holding view • View of last 5 contributions • Change in contact details (Telephone / Mobile no. / email ID) • Change password / security Question • Notifications • Tier II activation through eNPS • KYC re-verification using Aadhaar authentication • Facility to contribute Online • Withdrawal from Tier II account • Online IPIN generation

26. Annuities – Types & Providers • The following are the most common variants that are available: • Annuity for life --payment of annuity ceases on death. • Annuity guaranteed for 5, 10, 15 or 20 years and for life thereafter • Annuity for life with return of purchase price on death • Annuity for life increasing at simple rate of 3% p.a. • v. Annuity for life with a provision for 50% of the annuity to the spouse of the annuitant for life on death of the annuitant------- payment of annuity ceases and 50% of the annuity is paid to the surviving named spouse during his/her life time. If the spouse predeceases the annuitant, payment of annuity will cease after the death of the annuitant • VI Annuity for life to the subscriber, after death of subscriber 100% annuity to the spouse and after death of spouse return of the purchase price. • At present the following 5 ASPs are providing the Annuity services to NPS subscribers*: • 1. Life Insurance Corporation of India • 2. SBI Life Insurance Co. Ltd. • 3. ICICI Prudential Life Insurance Co. Ltd. • 4. HDFC Standard Life Insurance Co Ltd • Star Union Dai-ichi Life Insurance Co. Ltd • (* Subject to Change)

27. Provisions of Draft PFRDA (Withdrawals and Exit) Regulations, 2015--Other Salient features of the regulation • Default Annuity: It provides for annuity for life of the subscriber and his or her spouse (if any) with provision for return of purchase price of the annuity and upon the demise of such subscriber, the annuity shall be re-issued to the family members in the order as specified below: • (a) living dependent mother of the deceased subscriber; • (b) living dependent father of the deceased subscriber. • After the coverage of all the family members specified above, the purchase price shall be returned to the surviving children of the subscriber and in the absence of children, the legal heirs of the subscriber, as may be applicable. • The subscriber who wishes to opt out of the default option and wishes to choose the annuity contract of his choice from the available annuity contracts with the ASPs, shall be required to specifically opt for such an option.

29. PFRDA initiative to improve services was discussed please avail them for all your queries.

30. QUICK LINKS

32. Scheme wise return Available at NPS Trust Website http://www.npstrust.org.in/index.php/navreturns/returns 32

33. Pension Calculator Back

34. NPS Returns Calculator Back

35. Assessment!! 1. NPS is a retirement savings scheme which is not …………… a) Flexible b) Portable c) Tax efficient d) Mandatory 2. Minimum and maximum age for joining and exiting NPS is a) 20 years – 45 years b) 25 years – 60 years c)18 years – 40 years d) 18 years – 60 years 3. NPS scheme can be subscribed by an NRI • True • False 4. To join NPS it is essential that the subscriber should not be a member of any Provident Fund/ Pension Scheme. • True • False

36. 5. PRAN is an acronym for • Planned Retirement Account Number • Permanent Retirement Account Number • Peculiar Retirement Account Number • Public Registration Agency Network 6. Who can be a PoP (Point of Presence) • Bank • Financial Institution • Corporates • All of these • None of these 7. Which document is not essentially required for opening an NPS Account? • Subscriber Registration Form • Proof of Identity • Proof of address • Passport 8. Under NPS, two sub accounts are provided, Tier I and Tier II. Which of them is mandatory? • Tier I • Tier II • Both of them • None of them

37. 9. What is Government’s contribution to individual NPS accounts? • 10% • 15% • 20% • Rs. 1000/= per account per annum • Nil 10. What is the maximum number of NPS accounts that can be opened by an individual • 1 • 2 • 3 • 4 • No limit 11. What is the minimum annual contribution to Tier I account • Rs. 5,000.00 • Rs. 6,000.00 • Rs. 10,000.00 • Rs. 50,000.00 12. Maximum number of nominees that can be appointed for Tier I and Tier II accounts among whom they have to indicate the share of savings? • 2 • 3 • 4 • 5 • Any number

38. 13. What percentage of accumulated pension wealth should be utilised for purchase of annuity, after the subscriber attains the age of 60 years? • 30% • 40% • 60% • 80% 14. In the case of exit before attaining the age of 60, what portion of accumulated pension wealth will be mandatorily used for purchase of default annuity (corpus is <= Rs. 1 lakh) • 50% • 60% • 80% • 100% 15. What is the minimum vesting period for partial withdrawal from NPS? • 3 years • 5 years • 10 years • 15 years

39. Answers to the Quiz • d 11. b 2. d 12. b 3. a 13. b 4. b 14. d 5. b 15. c 6. d 7. d 8. a 9. e 10. a

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