National Pension Scheme
The National Pension Scheme is a social security initiative by the Central Government. This pension program is open to employees from the public, private, and even the unorganized sectors except those from the armed forces.
The scheme encourages people to invest in a pension account at regular intervals during the course of their employment. After retirement, the subscribers can take out a certain percentage of the corpus. As an NPS account holder, you will receive the remaining amount as a monthly pension post your retirement.
Earlier, the NPS scheme covered only Central Government employees. Central Government employees joining on or after 01-01- 2004 are mandatorily covered under the NPS. Now, however, the PFRDA has made it open to all Indian citizens on a voluntary basis.
The NPS scheme holds immense value for anyone who works in the private sector and requires a regular pension after retirement. The scheme is portable across jobs and locations, with tax benefits under Section 80C and Section 80CCD.
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Board of NPS Trust
The function of NPS Trust
The Board of Trustees of the National Pension System Trust has legal ownership of the trust and the funds.
The Trust is responsible for the monitoring of the operational and service level functions under the National Pension System or any other pension scheme regulated under the PFRDA Act, 2013 if it is so directed by PFRDA.
Broadly, the following are the obligations/responsibilities and liabilities of the Board of Trustees:
- Execute the individual pension account in its name with the subscriber.
- Approving audited scheme financials, internal audit reports, inspection, compliance reports, and any other reports, as specified by the Authority, which is to be submitted by the intermediaries to the National Pension System Trust.
- Monitoring and evaluation of all operational and service level activities of all intermediaries including government nodal offices and such other entity or person connected with the collection, management and recordkeeping, and distribution of accumulations, under the National Pension System, in accordance with the provisions of the Act or the regulations made or guidelines or circulars issued by the Authority
- Monitor and audit, the operational activities of and call for any information or reports from all intermediaries and issue instructions for protecting the interests of the beneficiaries;
- Take custody or keep under its control, all the property of the Trust, held by intermediaries, in Trust for the beneficiaries.
- protect the properties of the National Pension System Trust and safeguard the interests of the National Pension System Trust and its beneficiaries;
- Supervise the collection of any income due on assets held in the name of the National Pension System Trust and for claiming any repayment of tax and holding any income received in trust for the beneficiaries in accordance with the Trust Deed and, the regulations, guidelines or directions issued by the Authority
- Taking of action on reports submitted by the intermediaries in order to ensure compliance with the regulations applicable to them under the National Pension System
- Exit of the subscriber from the National Pension System
- Redressal of subscriber grievances in accordance with the Pension Fund Regulatory and Development Authority (Redressal of Subscriber Grievance) Regulations, 2015.
National Pension Scheme benefits
If you are wondering why you should invest in the NPS scheme, here’s your list of NPS benefits. NPS is a low-cost pension and investment product among the many NPS scheme benefits. Besides being effective for retirement planning, it is a key tool offering secure long-term returns and considerable income post-retirement. It is also a tax-efficient instrument. These features make it an ideal investment vehicle for diversifying your portfolio.
- Flexible- NPS offers a range of investment options and a choice of Pension Funds (PFs) for planning the growth of the investments in a reasonable manner and monitoring the growth of the pension corpus. Subscribers can switch over from one investment option to another or from one fund manager to another.
- Simple – Opening an account with NPS provides a Permanent Retirement Account Number (PRAN), which is a unique number it remains with the subscriber throughout his lifetime. The scheme is structured into two tiers:
- Tier-I account: This is the non-withdrawal permanent retirement account into which the regular contributions made by the subscriber are credited and invested as per the portfolio/fund manager chosen by the subscriber.
- Tier-II account: This is a voluntary withdrawal account that is allowed only when there is an active Tier-I account in the name of the subscriber. The withdrawals are permitted from this account as per the needs of the subscriber as and when required.
- Portable- NPS provides seamless portability across jobs and across locations. It would provide a hassle-free arrangement for the individual subscribers while he/she shifts to the new job/location, without leaving behind the corpus build, as happens in many pension schemes in India.
- Well Regulated- NPS is regulated by PFRDA, with transparent investment norms, regular monitoring, and performance review of fund managers by NPS Trust. The account maintenance costs under NPS are the lowest as compared to similar pension products across the globe. While saving for a long-term goal such as retirement, the cost matters a lot as the charges can shave off a significant amount from the corpus over 35-40 years of investment period.
- Dual benefit of Low Cost and Power of compounding: Till retirement, pension wealth accumulation grows over the period of time with a compounding effect. With the account maintenance charges being low, the benefit of accumulated pension wealth to the subscriber eventually becomes large.
Some of the other perks associated with NPS include:
- Account holders are free to choose where to invest
- Investments under NPS are handled by highly qualified pension fund managers (PFMs)
- The account holder can determine the value of the monthly contribution
- NPS accounts can be managed from any part of India
- NPS fetches annual tax benefits of up to Rs. 2 lakh
