WHAT IS NATIONAL PENSION SYSTEM (NPS)
National Pension System or NPS is a government-sponsored pension scheme. It was launched in January 2004 for government employees. However, in 2009, it was opened to all sections.
National Pension System (NPS) is a pension cum investment scheme launched by Government of India to provide old age security to Citizens of India. It brings an attractive long term saving avenue to effectively plan your retirement through safe and regulated market-based return. The Scheme is regulated by Pension Fund Regulatory and Development Authority (PFRDA).National Pension System Trust (NPST) established by PFRDA is the registered owner of all assets under NPS.
The scheme allows subscribers to contribute regularly in a pension account during their working life. On retirement, subscribers can withdraw a part of the corpus in a lumpsum and use the remaining corpus to buy an annuity to secure a regular income after retirement.
FREQUENTLY ASKED QUESTION ON NATIONAL PENSION SYSTEM (NPS):
Who can join NPS?
Any Indian citizen between 18 and 60 years can join NPS. The only condition is that the person must comply with know your customer (KYC) norms.
Can a Non Resident Indian (NRI) join NPS?
Yes, an NRI can join NPS. However, the account will be closed if there is a change in the citizenship status of the NRI. However, OCI (Overseas Citizens of India) and PIO (Person of Indian Origin) card holders and HUFs are not eligible for opening of NPS account.
How do I join NPS?
You should open an NPS account with entities known as Point of Presence (POP). Most banks, both private and public sector, are enrolled as POPs. Several financial institutions also act as POPs.
The authorized branches of a POP, called point of presence service providers (POP-SPs), act as the collection points.
How can I find POPs near me?
You can access them through the website of Pension Fund Regulatory and Development Authority (PFRDA). https://www.npscra.nsdl.co.in/pop-sp.phpWhat are the documents needed for opening an NPS account?
You should fill the subscriber registration form and submit it along with proof of identity, address, and date of birth to the POP.What is a Permanent Retirement Account Number (PRAN)?
Every NPS subscriber is issued a card with 12-digit unique number called Permanent Retirement Account Number or PRAN.What are Tier-I and Tier-II accounts?
NPS offers two accounts: Tier-I and Tier-II accounts. Tier-I is a mandatory account and Tier-II is voluntary. The big difference between the two is on withdrawal of money invested in them.
You cannot withdraw the entire money from Tier-I account till your retirement. Even on retirement, there are restrictions on withdrawal on the Tier-I account. The subscriber is free to withdraw the entire money from the Tier-II account.
Can I have more than one NPS account?
No, you cannot open multiple NPS accounts. In fact, there is no need to open a second account as NPS is portable across sectors and locations.What is the minimum contribution in NPS?
You have to contribute a minimum of Rs 6,000 in your Tier-I account in a financial year.
What will happen if I don’t make the minimum contribution?If you do not contribute the minimum amount, your account will be frozen. You can unfreeze the account by visiting the POP and pay the minimum required amount and a penalty of Rs 100.
Will the government also contribute to my NPS account?
No, the government will not contribute to your NPS account.Who manages the money invested in NPS?
The money invested in NPS is managed by PFRDA-registered Pension Fund Managers. At the moment, there are eight pension fund managers: ICICI Prudential Pension Fund, LIC Pension Fund, Kotak Mahindra Pension Fund, Reliance Capital Pension Fund, SBI NSE 1.87 % Pension Fund, UTI Retirement Solutions Pension Fund, HDFC Pension Management Company, and DSP BlackRock Pension Fund Managers.What are the investment choices available in NPS?
The NPS offers two choices:
1) Active Choice: This option allows the investor to decide how the money should be invested in different assets.2) Auto choice or lifecycle fund: This is the default option which invests money automatically in line with the age of the subscriber.
What are the investment options available under Active Choice?
The Active Choice offers three funds or investment options: Asset Class E (invests 50 per cent in stocks); Asset Class C (invests in fixed income instruments other than government securities); Asset Class G (invests only in government securities). An investor can choose one of these funds or opt for a combination of them.Can I change my investment choices?
Yes, you can change your investment choices once in a financial year for both Tier-I and Tier-II accounts.Can I change my scheme and pension fund managers?
Yes, you can change your scheme preference and pension fund manager. You can even change your investment option (active and auto choices).Can I have different pension fund managers and investment option for Tier I and Tier II account?
Yes, you can select different pension fund managers and investment options for your NPS Tier I and Tier II accounts.What are the tax benefits available for NPS?
An employee’s own contribution is eligible for a tax deduction --up to 10 per cent of the salary (basic plus DA) – under Section 80CCD(1) of the Income Tax Act within the overall ceiling of Rs 1.5 lakh allowed under Section 80C and Section 80CCE.
The employer’s contribution to NPS is exempted under Section 80CCD (2).
Moreover, individuals can claim an additional deduction of up to Rs 50,000 under Section 80CCD (1B),which is in addition to Rs 1.5 lakh permitted under Section 80C.A self-employed person can also contribute 10 per cent of his gross income under Section 80CCD (1) in NPS.
When can I withdraw money from NPS?
NPS is a pension product. So, you are expected to stay invested until your retirement. At 60, you must use at least 40 per cent of the corpus to buy an annuity income from a PFRDA-listed insurance company. You have the option to withdraw 60 per cent of the corpus tax-free.Can I defer withdrawing the lumpsum amount at 60?
Yes, you can defer withdrawing the lumpsum amount in NPS until you are 70 years old.What if I want to take the money out before I am 60?
If you are getting out of the scheme before you are 60 years old, you can only withdraw 20 per cent of the accumulated corpus in NPS. You must use 80 per cent of the corpus to buy an annuity.What happens to the money if I discontinue the scheme?
If you discontinue your investment, your account will be frozen. You can reactivate the account only if you make the minimum contribution required along with the penalty.What happens if the subscriber dies before 60 years?
If the subscriber dies before 60 years, the entire accumulated wealth would be paid to the nominee/legal heir of the subscriber.How do I withdraw the money from NPS?
You will have to submit the withdrawal application to the POP along with relevant documents. POP would authenticate the documents and forward them to Central Record-keeping Agency (CRA) and NSDL. CRA would register your claim and forward you the application form along with details of documents that need to be submitted. Once you complete the necessary procedure, CRA processes the application and settles the account.What are the documents to be submitted along with withdrawal forms?
You have to submit the following documents along with the withdrawal forms for nps withdrawal:
1. PRAN card (original)2. Attested copy of proof of identity
3. Attested copy of proof of address
4. A cancelled cheque
What is an annuity?
An annuity provides a regular income (it could be monthly, quarterly, annual, etc) at a specified rate for a specified period chosen by the subscriber.
In NPS, a subscriber must use at least 40 per cent of the corpus to buy an annuity. It means the person can pay the money to an Annuity Service Provider (ASP) and choose an annuity option to ensure a regular income after retirement.
Who are the Annuity Service Providers?
Currently, these insurance companies are empanelled by PFRDA as ASPs:1. Life Insurance Corporation of India
2. SBI Life Insurance
3. ICICI Prudential Life Insurance
4. Bajaj Allianz Life Insurance
5. Star Union Dai-ichi Life Insurance
6. Reliance Life Insurance
7. HDFC Standard Life Insurance
Can I have different pension fund managers and investment option for Tier I and Tier II account?
Yes, you can select different pension fund managers and investment options for your NPS Tier I and Tier II accounts.
Yes, you can select different pension fund managers and investment options for your NPS Tier I and Tier II accounts.
What types of Withdrawals are allowed under the National Pension System?
As per Pension Fund Regulatory & Development Authority (PFRDA) Exit Rules, following Withdrawal categories are allowed:
- a) Upon Normal Superannuation – At least 40% of the accumulated pension wealth of the subscriber has to be utilized for purchase of annuity providing for monthly pension of the subscriber and the balance is paid as lump sum to the subscriber.
- In case the total corpus in the account is less than Rs. 2 Lakhs as on the Date of Retirement (Government sector)/attaining the age of 60 (Non-Government sector), the subscriber (other than Swavalamban subscribers) can avail the option of complete Withdrawal.
- b) Upon Death – The entire accumulated pension wealth (100%) would be paid to the nominee/legal heir of the subscriber and there would not be any purchase of annuity/monthly pension.
- c) Exit from NPS Before the age of Normal Superannuation – At least 80% of the accumulated pension wealth of the subscriber should be utilized for purchase of an annuity providing the monthly pension of the subscriber and the balance is paid as a lump sum to the subscriber.
What are the different types of Withdrawal Forms available?
Based on the different types of Withdrawal request, following forms are required to be submitted to the concerned POP/POP-SP
Type Of Withdrawal
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Request
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Central/State Government
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Corporate/All Citizens of India Sector
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Swavalamban (NPS-Lite) Sector
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Superannuation
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101-GS
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301
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501
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Premature Exit
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102-GP
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302
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502
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Death
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103-GD
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303
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503
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Where are the Withdrawal forms available to the subscribers?
Withdrawal forms are available on the NSDL-CRA Corporate Website (http://www.npscra.nsdl.co.in). Subscriber can also send an email to "npsclaimassist@nsdl.co.in" or "info.cra@nsdl.co.in" to get the Withdrawal forms in their e-mail ID.What is an Exit Claim ID and what is its relevance?
For any superannuating subscriber/attaining 60 years of age, CRA generates a Claim ID six months prior to the attaining 60 years of age. CRA intimates the generation of Claim ID to the subscriber / POP-SP vide e-mails, letters, SMS. POP/POP-SP can also view the Claim IDs generated for underlying subscribers at ‘Welcome Page’ in CRA site.For Pre-mature Exit and Death cases, the Claim IDs will be generated by the associated POP-SP or CRA when the Withdrawal request for the same is received.
If the Claim ID is not generated for a subscriber even if the date of birth is less than six months away, the concerned POP-SP should update the correct retirement date in the CRA system.
Can a subscriber directly submit the Withdrawal request form to CRA?
No, the Withdrawal forms should be submitted to the associated POP/POP-SP (through the POP in case of Corporate model subscriber) for onward submission at CRA.
POP/POP-SP should stamp and authorise the form after performing the necessary due diligence for the form and the supporting documents. The duly authorised forms and the documents can be then be forwarded to CRA for further processing.
What are the documents to be submitted while requesting for Superannuation & Pre-mature Exit?
Following documents are to be submitted alongwith the completely filled Withdrawal form for Superannuation & Pre-mature Exit at CRA:
• Covering Letter from the associated POP/POP-SP to be submitted alongwith the Withdrawal form
• Advanced stamped receipt needs to be duly filled and cross-signed on the Revenue stamp by the subscriber.
• Original PRAN card or affidavit stating the reason for non-submission of PRAN card in case of Non submission of PRAN card
• KYC documents (address and photo-id proof) attested by mapped POP/POP-SP.
• ‘Cancelled Cheque’ (having subscriber’s Name, Bank Account Number and IFS Code) or ‘Bank Certificate’ on Bank Letterhead having subscriber’s name, Bank Account Number and IFS Code required to be submitted as bank proof. ‘Copy of Bank Passbook’ can be accepted, however, it should have subscriber’s photograph on it and should be self attested by the subscriber.
What are the documents to be submitted while requesting for Withdrawal due to death of a subscriber?
Following documents are to be submitted alongwith the completely filled Withdrawal forms at CRA:
• Covering Letter from the associated POP/POP-SP to be submitted alongwith the Withdrawal form
• Advanced stamped receipt need to be duly filled and cross-signed on the Revenue stamp by the subscriber.
• Original PRAN card OR affidavit stating the reason for non-submission of PRAN card in case of Non submission of PRAN card
• KYC documents (address and photo-id proof) attested by mapped POP/POP-SP.
• ‘Cancelled Cheque’ (having subscriber’s Name, Bank Account Number and IFS Code) or ‘Bank Certificate’ on Bank Letterhead having claimant’s name, Bank Account Number and IFS Code required to be submitted as bank proof. ‘Copy of Bank Passbook’ can be accepted, however, it should have claimant’s photograph on it and should be self attested by the claimant.
• Original Death Certificate issued by the Local Authority.
• In case the Nominee details are not available in the CRA system, a legal heir certificate OR a certified copy of family member’s certificate issued by Executive Magistrate is required indicating the relationship of the claimant with the deceased as well as supporting documents is to be provided. If all the legal heirs are not claiming the pension funds, Relinquishment deed to be submitted from all the legal heirs (except the Claimant) on a Stamp paper of Rs. 100/-alongwith the KYC documents (Photo ID proof and Address proof) of all the legal heirs duly attested by the mapped POP/POP-SP. Also an Indemnity bond needs to be obtained from the claimant stating the responsibility for claiming on behalf of all the legal heirs.
• POP/POP-SP has to submit the Death IRA compliance certificate if the subscriber’s PRAN is Non-IRA compliant.
What are the major reasons for ‘Rejection’ / ‘On Hold’ of a Withdrawal request?
Some of the major discrepancies observed at CRA in the withdrawal forms are listed below:
- a) KYC documents (Photo-ID Proof and Address Proof) not attested by mapped POP/POP-SP.
- b) Original PRAN card OR Affidavit in case of non-submission of PRAN card not submitted along with the Withdrawal form.
- c) ‘Date of Retirement’ mentioned on the Withdrawal form does not match with date mentioned on the POP/POP-SP covering letter. Hence, POP/POP-SP confirmation is required for correct Date of Retirement.
- d) Covering letter from the associated POP/POP-SP not submitted along with the Withdrawal form.
- e) The associated POP/POP-SP has not authorized the Withdrawal form.
- f) Withdrawal fund allocation percentage not provided in the Withdrawal form.
- g) Nomination details/Witness (to nomination) details not provided in the Nomination form.
- h) Address mentioned in the Withdrawal form is different from the Address Proof provided.
- i) Name provided in the Withdrawal form is different from the name provided in the KYC documents (Photo ID and address proof).
- j) Photograph is not ‘self attested’ by the subscriber/claimant.
- k) In case of death, Withdrawal request not submitted by the registered nominee as per the CRA system.
If the subscriber is superannuating six months from now, when the Withdrawal form is be submitted and when the Withdrawal request will get processed at CRA?
If the subscriber is going to superannuate six months from now, the subscriber can submit his Withdrawal Form anytime after the generation of Claim ID, however the Withdrawal request will be processed only after completion of Superannuation age/ Date of Retirement (as per the CRA records).
Can Claim ID be generated in case of Pre-mature Exit?
In order to generate Claim ID for Withdrawal of NPS funds in case of Pre-mature Exit, the subscriber would have to contact the POP-SP for generation of Claim ID.How superannuated subscriber can capture the online Withdrawal request?
Subscriber can capture the online Withdrawal request six months in advance from the date of superannuation/ attaining the age of 60. Subscriber can submit the request by logging into the CRA website (www.cra-nsdl.com) under the menu ‘Exit Withdrawal Request’).Can a subscriber claim for 100% Withdrawal in case of attaining 60 years of age (Superannuation)and Pre-mature Exit?
In case of Pre-mature Exit, 100% is not allowed. However, in case of Superannuation, a subscriber can claim 100% Withdrawal if the total accumulated corpus is less than Rs. 2,00,000 at the time of Superannuation/attaining age of 60 years.Who can claim the accumulated wealth in case of subscriber’s death?
Nominee(s) registered in the CRA system can submit the Withdrawal request to CRA through the subscriber’s associated POP/POP-SP (through the associated Corporate in case of Corporate model subscribers). If the Nominee was not registered with CRA, legal heir(s) can submit the Withdrawal request.
In case of death of any NPS subscriber who had nominated two nominees (a major and a minor), can the claim be made by the major claimant only?
Withdrawal form needs to be submitted by all the nominees registered in CRA system. In case the nominee is a minor, Withdrawal form has to be submitted by the guardian along with the birth certificate of the minor.
How does the subscriber / claimant receives the Withdrawal proceeds?
The Withdrawal proceeds are credited electronically to the bank account of the subscriber or claimant (as per the bank details provided in the Withdrawal form).
Whether Withdrawal proceeds can be provided through Cash or Demand Draft?
No, Withdrawal proceeds are credited electronically to the bank account of the subscriber or the claimant, as the case maybe. It is necessary for the subscriber /claimant to have a bank account.
What communications are sent to subscribers providing status of his /her requests?
Following communications are sent to the subscribers during the Withdrawal process:
• E-mail, letter and SMS alert to NPS subscribers at the time of generation of Claim ID
• E-mail & letter is sent to the claimant for any discrepancy observed
• At the time of acceptance of request, Transaction Statement is sent to the subscriber through email
• E-mail to subscriber intimating the Fund Transfer Details of the credit remitted to claimant/ASP bank account
How can one check the status of Withdrawal request?
Withdrawal status can be checked through the ‘Limited access View’ functionality which is available at CRA website (www.cra-nsdl.com). POP/POP-SP and subscriber can also check the status under the menu ‘Exit Withdrawal Request’ by logging into website.
Where can a subscriber enquire about the withdrawal procedures under NPS?
The subscriber can either send an email to info.cra@nsdl.co.in or npsclaimassist@nsdl.co.in case of any query pertaining to withdrawal or may get in touch with his/her associated POP/Corporate. Withdrawal related guidelines are also available on the PFRDA and CRA website.
What is a Deferred Lump-sum Withdrawal?
Subscribers exiting NPS on account of Superannuation can opt for deferring the Withdrawal of their lumpsum share (maximum 60%) to a maximum period of 10 years or 70 years of age (whichever is earlier).
What happens to the subscriber's investments if he / she discontinue the scheme?
If a subscriber discontinues his/her investments under the scheme and the minimum contributions are not made as stipulated, the account will be frozen and can be reactivated only by paying the penalty alongwith the minimum contribution.
However, if a subscriber wishes to exit from NPS before attaining the age of 60, he/she can withdraw upto 20% of the sum accumulated till that point of time. The subscriber has to buy annuity with the rest of the money. The commencement of the annuity depends on the annuity plan / scheme offered by the ASPs.
What is Annuity?
An annuity is a financial instrument which provides for a regular payment of a certain amount of money on monthly/quarterly/annual basis for the chosen period for a given purchase price or pension wealth. In simple terms it is a financial instrument which offers monthly/quarterly/annual pension at a specified rate for the period you chose.
In the context of NPS, Annuity refers to the monthly sum received by the subscriber from the Annuity Service Provider (ASP). A percentage of the pension wealth as decided by the subscribers (minimum 40% & 80% is to be invested with ASP in case Withdrawal is due to Superannuation & Pre-mature Exit respectively) is utilized for purchase of Annuity from the ASP.
Who is the Annuity service provider?
Indian Life Insurance companies which are licensed by Insurance Regulatory and Development Authority (IRDA) are empanelled by PFRDA to act as Annuity Service Provider’s to provide annuity services to the subscribers of NPS.
What is a Deferred Annuity?
As per PFRDA Exit Rules, subscribers exiting NPS on account of Superannuation or Pre-mature Exit can defer purchase of Annuity (minimum 40% & 80% is to be invested with ASP in case Withdrawal is due to Superannuation & Pre-mature Exit respectively) for a maximum period of 3 years.
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.
What happens to the Tier II corpus of a subscriber when exiting from NPS?
The units available in the Tier II account of the NPS subscriber who has submitted a Withdrawal request for Tier I at CRA (provided the request stands approved from the concerned authority) are redeemed alongwith the Tier I balance. The funds redeemed are transferred to the account provided by the subscriber in the Withdrawal form.
How can a subscriber redeem from Tier II account?
In order to withdraw from Tier II account, the subscriber needs to submit a duly filled UOS-S12 form to the associated POP-SP. If the request is entered and authorised in CRA system by the POP/POPSP before 11:45 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 working 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.
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