COMPARATIVE STUDY ON SERVICES OF NPS AMONG DIFFERENT

BANKS.

A Project Submitted to
University of Mumbai for partial completion of the degree of
Bachelor in Commerce (Accounting and Finance)
Under the Faculty of Commerce

By

ROMA HARCHANDANI

Under the Guidance of

Prof. ASHWINI NAIK

H.R. COLLEGE OF COMMERCE & ECONOMICS,

123, DINSHAW VACHA ROAD, CHURCHGATE, MUMBAI 400020.

APRIL 2019
COMPARATIVE STUDY ON SERVICES OF NPS AMONG DIFFERENT
BANKS.

A Project Submitted to
University of Mumbai for partial completion of the degree of
Bachelor in Commerce (Accounting and Finance)
Under the Faculty of Commerce

By

ROMA HARCHANDANI

Under the Guidance of

Prof. ASHWINI NAIK

H.R. COLLEGE OF COMMERCE & ECONOMICS,

123, DINSHAW VACHA ROAD, CHRUCHGATE, MUMBAI 400020.

APRIL 2019
 H.R. COLLEGE OF COMMERCE AND ECONOMICS
123, DINSHAW VACHA ROAD, CHURCHGATE, MUMBAI 400020.

Certificate

This is to certify that Miss Roma Harchandani has worked and duly completed
her Project Work for the degree of Bachelor in Commerce (Accounting &
Finance) under the Faculty of Commerce and her project is entitled,
“Comparitive study on services of NPS among different banks” under my
supervision.

I further certify that the entire work has been done by the learner under my
guidance and that no part of it has been submitted previously for any Degree or
Diploma of any University.

It is her own work and facts reported by her personal findings and
investigations.

Signature of Signature of Principal

Project Coordinator of College

Internal Examiner External Examiner

 Declaration by learner

I the undersigned Miss Roma Harchandani here by, declare that the work
embodied in this project work titled “Comparative study on services of NPS
among different banks”, forms my own contribution to the research work
carried out under the guidance of Prof. Ashwini Naik is a result of my own
research work and has not been previously submitted to any other University for
any other Degree/ Diploma to this or any other University.

Wherever reference has been made to previous works of others, it has been
clearly indicated as such and included in the bibliography.

I, here by further declare that all information of this document has been obtained
and presented in accordance with academic rules and ethical conduct.

(Roma Harchandani)

Certified by,

Prof. Ashwini Naik.

 ACKNOWLEDGMENT

To list who all have helped me is difficult because they are so numerous and the
depth is so enormous.

I would like to acknowledge the following as being idealistic channels and fresh
dimensions in the completion of this project.

I take this opportunity to thank the University of Mumbai for giving me chance
to do this project.

I would like to thank my Principal, Prof Parag Thakkar for providing the
necessary facilities required for completion of this project.

I take this opportunity to thank our Coordinator Ashwini Naik, for her moral
support and guidance.

I would also like to express my sincere gratitude towards my project guide

Prof. Ashwini Naik whose guidance and care made the project successful.

I would like to thank my College Library, for having provided various

reference books and magazines related to my project.

Lastly, I would like to thank each and every person who directly or indirectly
helped me in the completion of the project especially my Parents and Peers
who supported me throughout my project.
Comparative study on services of NPS among
different banks.
 Index

Chapter 1 ................................................................................................... 1
Executive summary ...................................................................................................... 1

Chapter 2 ................................................................................................... 3
Introduction .................................................................................................................. 3
National Pension Scheme (NPS) ....................................................................... 4
NPS Tax Benefits 2019 – Sec.80CCD(1), 80CCD(2) and 80CCD(1B) ............ 7
Types of NPS Account..................................................................................... 11
Tier I Account ............................................................................................................... 11
Tier II Account .............................................................................................................. 14
Difference between Tier-1 and Tier-2: ............................................................ 17
What is Scheme Preference in NPS Account .................................................. 18
What are the types of funds available in NPS? ................................................ 25
How to join NPS .............................................................................................. 26
POP-offline method ..................................................................................................... 26
Online Method ............................................................................................................. 27
NPS App .......................................................................................................... 29
How to calculate NPS ...................................................................................... 30
NPS Structure................................................................................................... 32
NPS Architecture ............................................................................................. 33
Benefits of investing in NPS for pension purpose ........................................... 35
NPS Scheme for NRI’s .................................................................................... 36
Limitations of NPS .......................................................................................... 37
How to choose Pension Fund Manager? .......................................................... 38
List of NPS Fund Managers ............................................................................. 40
Who is the best NPS Fund Manager for 2018?................................................ 47
Chapter 3 ................................................................................................. 49
Research methodology ............................................................................................... 49

Chapter 4 ................................................................................................. 52
Literature Review ...................................................................................................... 52

Chapter 5 ................................................................................................. 53
Data analysis , interpretation & presentation ......................................................... 53
NPS Returns for 2018 – Who is best NPS Fund Manager? .......................................... 53
NPS Returns for 2018- Best NPS Fund under State Government Scheme .................. 55
Comparison of asset under management of trusts ..................................................... 57
Findings and analysis ................................................................................................... 58

Chapter 6 ................................................................................................. 66
Conclusion & Suggestion ........................................................................................... 66
NPS In 10 Simple Points ............................................................................................ 67

Chapter 7 ................................................................................................. 68
Bibliography ............................................................................................................... 68
Articles ........................................................................................................................ 68
Websites ...................................................................................................................... 68

Chapter 8 ................................................................................................. 69
Annexure..................................................................................................................... 69

List of Graphs,Tables and Pictures:

Graphs Tables Pictures
17 7 3
Chapter 1
Executive summary

India has the second largest population in the world. The working population of the
world in India is also the second largest. The only old age security available in India is
for people working in the Central or State Government enterprises or Public Sector.
Once these sector were the biggest employers in the country, therefore covering a vast
portion of the working population. This security scheme left out the people in the
agricultural and the unorganized sector which was a very large population. With rapid
development and industrialization and the privatization drive a huge population today
works in industries that provide no old age security in the form of pension.

The current state of pensions in India is the result of individual plans developed and
amended over several decades, rather than of a comprehensive and coherent approach
to old age income security and social protection, based upon a guiding set of principles.
This has resulted in gaps of coverage in several areas, and duplication within various
programs in other areas. Similarly, income generated through existing programs is
inadequate for many retirees, and often does not provide for protection against the risks
of longevity and inflation. India is undergoing major demographic shifts, in which the
elderly population will double from its 1991 level by 2016.

India does not have a comprehensive old age income security system. There are
however, some mandatory schemes for employees of State and Central governments,
employees of public sector banks, employees in firms with a staff of 20 or more and
some others. In recent years, the insurance and the mutual fund industry in India has
also started offering pension plans. In 2004, a new defined contribution individual
account pension system was constituted for Central government employees recruited
after January 1, 2004.

The Government of India in exercise of their executive powers adopted 'National

Pension System' (NPS) based on defined contributions in respect of all new entrants to
Central Government services, excepting the Armed Forces, with effect from 1st January
2004. Most of the State Governments have since notified a similar pension system for

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their new entrants. NPS accumulates savings into subscribers PRA while he is working
and use the accumulations at retirement to procure a pension for the rest of his life.

PFRDA has also made NPS available to all citizens of India, with effect from 1st May
2009 on a voluntary basis. In pursuance to PFRDA's commitment to make available an
avenue for saving for old age to all sections of society, PFRDA has now launched a
separate model to provide NPS to the employees of corporate entities, including PSUs
since December 2011. This model is titled "NPS - Corporate Sector Model".

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Chapter 2
Introduction
It is true that even during the early part of the last decade, people used to think and
talk about retirement planning only in their early 50s. They had a number of reasons
for that:

o The state of the Indian economy during most part of the 20th century.

o The economy was predictable, stable, smooth, and without shocks

o The feeling that pension is only for government employees.

o The lack of awareness on the need of pension and the planning for it.

o The inaction of the financial sector in not creating a market for pension
products.

o The joint family system and the traditional Indian mentality of taking care of
elders.

o The developments in the past 10 years changed the scenario drastically.

The youth of this generation experienced the boom and the recession in the same
decade. The roller-coaster ride experienced in the personal and professional fronts are
still fresh in their memories. The advent of new generation private insurance
companies has led to the introduction of a breed of new pension products. In the
modern era, we could see the deterioration of the joint family system and the
emergence of the nuclear family. These factors have led to some change in the
popular approach too. Now, most people want to start planning for their retirement
life in their early 30s or even earlier.
But the pity is most of them are getting lost in the numerous choices being offered by
various pension providers. And many land up with very costly products, leading to
depletion of their savings. Eventually, this leads to a shortfall in their targeted corpus
when they retire. This necessitates a search to identify an ideal pension plan to take
care of all requirements – cheaper, secure, stable, decent growth, and, last but not the
least, tax concessions, which will make it more attractive. National Pension System
(NPS) seems to be an ideal choice.

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National Pension Scheme (NPS)
NPS is a social security initiative of the Government of India, which aims to provide
financial cover to the individuals after their retirement. The government has set up the
Pension Fund Regulatory and Development Authority (PFRDA) as an autonomous
body to govern the NPS. The scheme is being widely promoted by the PFRDA so that
people of all classes are benefited. The contributions made in NPS are invested into
three classes of funds, namely Equity (E), Fixed Return Instruments (C), and
Government Bonds (G). Individuals have the option to choose the allocation of funds.
However, investment in equities is restricted to 50% of the contribution. While
ensuring that individuals benefit from the equity market, the allocation to government
and fixed return instruments ensure a balance in an underperforming stock market.
NPS has features such as transparent investment norms, regular monitoring, and
performance review of pension fund managers by NPS trust. An NPS account can be
operated from anywhere in the country irrespective of employment and geography.
The PFRDA recently launched a portal (eNPS) to enable online transactions. New
accounts can be opened with Aadhaar or PAN card, contributions can be made, and
fund performance and status can be tracked online.
Charges and fund management: NPS is perhaps the world’s lowest cost pension
scheme and it is one of the key selling points of the scheme. Though the fund
management fee which is currently fixed at 0.01% may go up, the maximum is
capped at 0.10%. On an investment of Rs 1 lakh, the fund management fee is just Rs
10 a year (max 100 in future), compared to Rs 1,500-2,500 charged by mutual funds
or Unit linked Insurance plans. This low fee structure will play a major role during
accumulation, considering the long term nature of the product. Further, the minimum
annual contribution has been kept at a low amount of Rs. 1000 per year, with no
maximum limit. The fund is currently managed by notable Fund Managers like LIC,
SBI, HDFC, ICICI, UTI, Reliance, Kotak etc. which promises optimization of funds
to ensure better returns to the subscribers, which may not be possible for Individuals
to achieve at a personal level.

Page | 4
Tax concessions: Contribution up to Rs 50,000 made toward an NPS account is
eligible for an exclusive tax deduction under section 80 CCD (1B). Further,
employees can invest 10% of their basic pay through their employers to get additional
tax rebate under section 80 CCD (2). Thus, while saving for retirement, additional tax
benefits are available which are not available for other pension plans.

Withdrawals: A subscriber of NPS for at least 10 years can conduct three partial
withdrawals during his subscription period with a gap of at least five years between
two withdrawals. The maximum withdrawal limit is set as 25% of self-contribution.
The purpose of withdrawal can be children’s higher education or marriage,
construction/purchase of house, and treatment of specific critical illness for self,
spouse, children, or dependent parents. During retirement, up to 40% of the corpus
built can be withdrawn as lump sum and is exempted from tax. Individuals have to
mandatorily invest 40% of the fund to purchase pension annuity. The balance 20%
can either be invested in annuity or withdrawn as lump sum.

The Budget 2017 has come up with a great respite for those who have invested in
National Pension scheme (NPS) or planning to invest in it.This is so because now
partial withdrawals from NPS will be tax free. Before this partial withdrawals were
taxable. PFRDA (Pension Fund regulatory and development authority) allows the
Partial withdrawal from NPS up to 25% of contribution made by subscriber. However
partial withdrawal is allowed subject to fulfillment of certain conditions as below:
o The Partial withdrawal shall be allowed for specific purposes such as higher
education of children, marriage of children, purchase or construction of
residential house or for treatment of specified diseases.
o Individual should have subscribed to NPS for at least 10 years.
o Maximum of 3 withdrawals during the entire tenure are allowed.
o Minimum gap of 5 years is required between the two withdrawals. However,
this condition shall not apply in case of withdrawal for treatment of specified
illness.
Limit on Amount of withdrawal
The maximum amount which is allowed to be withdraw is 25 % of the contribution
made by the subscriber and not the total amount accumulated in the fund.
Suppose you have invested Rs 6 lakhs in the NPS so far. This is your contribution
towards the scheme. Let’s assume if after 11 years the Rs 6 lakhs grows into Rs 14

Page | 5
lakhs. And if you want to withdraw some amount, you will be allowed to withdraw up
to 25% of the contribution which is Rs 6lakhs ant not Rs14 lakhs i.e. 25 % of 6lakhs
is Rs 1.5 lakhs.
This amendment will be effective from 01.04.2017.The partial withdrawals made
before 1.04.2017 will be taxable.
Tax Treatment on withdrawal from NPS
o Withdrawal on retirement/at the age of 60
o Withdrawal up to 40% of the accumulated wealth in NPS is exempt from tax
at the time of retirement. However maximum amount that you can withdraw at
the retirement is 60% of the accumulated wealth and balance 40% needs to be
utilized for the purchase of annuity providing monthly pension to the
subscriber.
o Withdrawal from NPS before retirement (irrespective of the cause)
o If you want to withdraw from NPS before the age of 60 or before retirement
(other than the purpose specified for partial withdrawal), the amount
withdrawn will not be taxable but the amount that can be withdrawn is limited
to only 20% of the accumulated wealth in NPS and balance 80% of the
accumulated pension wealth has to be utilized for purchase of annuity
providing for monthly pension of the subscriber. However the annuity income
shall be taxable in the year of receipt as per the income tax slab rate applicable
to the subscriber.
o Withdrawal upon death of Subscriber
o The amount withdrawn in the event of death of subscriber shall be exempt
from tax. The entire accumulated pension would be paid to the legal
heir/nominee of the subscriber. However in case of govt employees, the entire
amount cannot be withdrawn. Purchase of annuity plan is mandatory by the
nominee.
o 100% withdrawal at the time of retirement/attaining the age of 60: 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.

Page | 6
NPS Tax Benefits 2019 – Sec.80CCD(1), 80CCD(2) and 80CCD(1B)
Earlier NPS was treated as an EET (Exempt-Exempt-Taxed) status product. Now it
turned to be EEE (Exempt-Exempt-Exempt) status product. EEE means you will get
certain tax benefits at the time of investment. The returns or the growth during the
period of investment is not taxable. Also, now the maturity amount is also tax free
(with certain conditions).

Before this new rule came into picture, out of the final corpus, 40% has to be
annuitized (you have to buy a pension or annuity plan from Life Insurance
Companies), 40% was tax-free and 20% was taxable as per the applicable slab at that
time.

Hence, whatever 60% you withdraw from the accumulated corpus will now be tax
free. However, the rest 40% is go towards annuity (which is currently taxed as per
your tax slab).

NPS Tax Benefits while investing

First, let us understand the NPS tax benefits while investing. I tried to explain the
same from below image. Remember that tax benefits under Tier 1 and Tier 2 are not
available for all investors. Tier 2 tax benefits are available only for Government
Employees. (Refer the post related to difference between Tier 1 and Tier 2 of NPS at
“Difference between Tier 1 and Tier 2 Account in NPS“. For others, there are no tax
benefits if you invest in Tier 2 Account of NPS.

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Let us discuss one by one as below.

NPS Tax Benefits while investing in Tier 1 Account

NPS Tax Benefits under Sec.80CCD (1)

The maximum benefit available is Rs.1.5 lakh (including Sec.80C limit).

An individual’s maximum 20% of annual income (Earlier it was 10% but after Budget
2017, it increased to 20%) or an employee’s (10% of Basic+DA) contribution will be
eligible for deduction.

As I said above, this section will form the part of Sec.80C limit.

NPS Tax Benefits under Sec.80CCD (2)

There is a misconception among many that there is no upper limit for this section.
However, the limit is least of 3 conditions. 1) Amount contributed by an employer, 2)
10% of Basic+DA (For Central Government Employees it is now 14% of Basic+DA
effective from 1st April 2019) and 3) Gross Total Income.

This is additional deduction which will not form the part of Sec.80C limit.

The deduction under this section will not be eligible for self-employed.

NPS Tax Benefits under Sec.80CCD (1B)

This is the additional tax benefit of up to Rs.50,000 eligible for income tax deduction
and was introduced in the Budger 2015

Introduced in Budget 2015. One can avail the benefit of this Sect.80CCD (1B) from
FY 2015-16.

Both self-employed and employees are eligible for availing this deduction.

This is over and above Sec.80CCD (1).

NPS Tax Benefits while investing in Tier 2 Account

Earlier there was no income tax benefit if you invest in Tier 2 Account. However, due
to Government of India changed rules, if Central Government Employee contribute
towards Tier 2 Account, then he can claim the tax benefits under Sec.80C (Combined
maximum limit under Sec.80C will be Rs.1.5 lakh ONLY). Also, if someone availed

Page | 8
such tax benefits, then the invested money will be locked for 3 years (exactly like
ELSS Mutual Funds).

How much maximum NPS Tax Benefits available while investing?

For Self-Employed

The maximum benefit you can avail under Sec.80CCD (1) is Rs.1,50,000 (including
Sec.80C limit). Along with this Rs.50,000 under Sec.80CCD (1B). So total maximum
benefit an individual can avail is Rs.2 lakh (where Rs.1.5 lakh will be part of Sec.80C
limit).

Even though on paper it looks like maximum benefit available will be Rs.2 lakh. But
under Sec.80C, you will have lot of choices and few default options to save (like life
insurance premium or PPF). Hence, never be in wrong belief that NPS will ALONE
gives you Rs.2 lakh tax benefit.

For salaried

You can avail the tax benefit under Sec.80CCD (1)+Sec.80CCD (1B) up to Rs.2 lakh.
Along with that, you have another additional option to claim deduction under
Sec.80CCD (2), which is unlimited and based on certain conditions. I explained the
same in my above post.

The major benefit for Central Government employees comes here only. Because
earlier Government used to contribute 10% of Basic+DA, which is now increased to
14% of Basic+DA..

One more additional benefit for Central Government employees that they can invest
in NPS Tier 2 account and claim the deduction under Sec.80C (even though the
Sec.80C limit is also the part of Sec.80CCD (1)). But the combined limit is
Rs.1,50,000 only).

NPS Tax Benefits – While withdrawing

Assume that you accumulated Rs.100. In this, you have to buy an annuity for Rs.40
from Life Insurance Companies. They will pay you the pension as per the option you
have chosen. This pension is taxable as per your income tax slab.

Now the remaining Rs.60 is completely Tax-Free.

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Note-As per Budget 2017, the subscriber whose NPS account is at least 10 years old
will be eligible for withdrawing 25% of his/her contributions (without accrued income
earned thereon). This 25% withdrawal will be part of total 60% withdrawal (which is
tax-free).

NPS Taxation on Pre-mature withdrawal

In this case, you are allowed to buy an annuity product from the 80% of accumulated
corpus. So there is no confusion here as the annuity will be taxable income for you
year on year.

The confusion is about 20% lump sum withdrawal. IT Department need to come out
with clarity. The rules just say 40% of lump sum withdrawal from NPS is tax-free.
However, in this particular case the lump sum investment is 20%.

Hence, whether the whole 20% is tax-free (as it is less than 40% tax-free limit) or
40% of 20% is only tax-free (i.e. 8% from 20%). As of now, there is no clarity on this
aspect.

NPS Taxation on Partial withdrawal

Partial withdrawal from NPS is allowed on certain conditions.

There is no clarity about the tax treatment relating to this partial withdrawal.
However, I feel such partial withdrawal will be taxed in the year of withdrawal as per
subscriber’s income tax slab.

NPS Taxation in the event of death of subscriber

For Government Employees-Nominee will be allowed to withdraw only 20% lump

sum. The nominee must purchase the annuity from remaining 80%. However, in case
the accumulated corpus is less than or equal to Rs.2, 00,000 then his spouse (or
nominee) can withdraw all the amount at once without any mandatory.

For others-Nominee will be allowed to withdraw 100% accumulated corpus.

However, the nominee has a choice to buy an annuity too. The lump sum withdrawal
by the nominee will be exempt from Income Tax. If the nominee opted for buying an
annuity, then annuity income will be taxed as per nominee’s income tax slab in the
year of receipt.

Page | 10
Types of NPS Account

Tier I Account: NPS Tier 1 is a retirement account. It is the primary NPS account and
you can only open a Tier 2 account after opening a Tier 1 account.
NPS Tier 1 account can be opened under the NPS (Central Govt), NPS (State Govt),
NPS (Corporate) and NPS (All Citizens Models). Different rules apply to each, but
the general rules stated below apply to all types of NPS Tier 1 accounts. You need to
deposit at least Rs 1,000 per annum to keep the account active. The NPS Tier 1
account matures at the age of 60 and you can extend it till the age of 70.
NPS Tier 1 is eligible for tax deduction on contributions up to Rs 1.5 lakh under
Section 80 C and an additional Rs 50,000 under Section 80 CCD (1B) of the Income
Tax Act, 1961. On withdrawal, 40% of the NPS Tier 1 account balance can be
withdrawn tax-free. Another 40% must be compulsorily used to buy an
annuity (monthly pension). The remaining 20% can either be used to buy an annuity
or can be withdrawn after paying tax (at your slab rate).

Eligibility:
You have to be a citizen of India. NRIs can also open it as long as they are Indian
citizens.
You have to be between 18 and 65 years of age. Special rules apply if you open an
NPS Tier 1 account from the age of 60 – 65.
Minimum Investment: Rs 1,000 per annum Maximum Investment: No upper limit
Lock-in: Till you attain the age of 60
Returns: Depend on the asset allocation and pension funds chosen by you.

How to open an NPS Tier 1 account

If you have an Aadhar Card, PAN Card and bank account, you can open an NPS
account online at enps.nsdl.com or enps.karvy.com. These are the portals of the
Central Recordkeeping Agencies (CRAs) in the NPS. If you prefer to do this o½ine
(in person) you can go to your nearest NPS Point-of-Presence (PoP) which is typically
a designated branch of your bank. You can get a full list of NPS PoPs here.

Page | 11
In either case (online or o½ine account opening), you can make contributions, change
key details, change fund managers and initiate withdrawals online at enps.nsdl.com or
enps.karvy.com.

NPS Tier 1 Contribution

The minimum NPS Tier 1 contribution is Rs 1,000 per annum. There is no maximum
limit on your NPS Tier 1 contribution. The minimum initial contribution to the NPS
Tier 1 Account is Rs 500.
You can contribute online to NPS Tier 1 at enps.nsdl.com

NPS Tier 1 withdrawal rules

You can make up to 3 partial withdrawals from NPS Tier 1 during the lifetime of your
NPS account. Such withdrawals can be made 3 years after opening the account. They
can be made on specific grounds such as medical treatment, higher education of
children, marriage of children, home purchase etc. These withdrawals cannot in
aggregate exceed 25% of your contributions and are tax-free.
The NPS account matures at the age of 60 and you can withdraw up to 60% of your
NPS corpus tax-free. The balance 40% has to be used to buy an annuity (regular
pension). The annuity will be taxable each year.
You can also opt for premature exit before the age of 60, provided you have
completed 3 years in the NPS. In such a scenario, you can withdraw a maximum of
20% of your corpus which will be a taxable withdrawal. The balance 80% has to be
converted to an annuity.

NPS Tier 1 Lock-in Period

The NPS Tier 1 account has a lock-in till the age of 60. However as mentioned above,
you can exit the system prematurely before 60 subject to the terms and conditions
mentioned above.

NPS Tier 1 Tax Benefits

You get a tax deduction under Section 80CCD(1) and 80CCD(2) on contributions to
the NPS up to Rs 1.5 lakh per annum. For employees the maximum contribution
eligible for tax deduction under these sections is limited to 20% of salary. For self-
employed, the maximum contribution eligible for tax deduction under these sections
Page | 12
is limited to 20% of income. In addition you can get a tax deduction on contributions
up to Rs 50,000 under Section 80CCD(1B). Hence the total tax benefit on
contributions to the NPS is Rs 2 lakh per annum. In addition, the returns on NPS are
tax exempt while the money is retained in the NPS account. On maturity, up to 60%
of the accumulated NPS corpus can be withdrawn free of tax. Another 40% must be
used to buy an annuity (regular pension).

How to withdraw money from NPS Tier 1

You can log in to your NPS Tier 1 account from enps.nsdl.com. You need to provide
your PRAN number
Alternatively you can go to the nearest branch of your NPS point-of-presence (PoP),
usually your bank and
submit a withdrawal request there.

How to close an NPS Tier 1 Account

You can submit a request you close your NPS Tier 1 account by logging into your
account online at enps.nsdl.com.
Alternatively you can go to the nearest branch of your NPS point-of-presence (PoP),
usually your bank and submit a closure request there.

Tier 1 Returns
NPS Tier 1 returns are derived by investing in equities, corporate bonds, government
bonds and alternative assets – the four NPS asset classes. You can decide the split
between these assets as per your convenience subject to a limit of 75% on equity
investment and 5% on alternative assets*. You can decide You can also select 1 of 8
NPS pension fund managers. They are SBI, UTI, LIC, Aditya Birla, HDFC, Kotak,
ICICI Prudential and Reliance Capital. NPS returns are thus akin to mutual fund
returns rather than the fixed returns offered by savings schemes like PPF.

Page | 13
Tier II Account:

NPS Tier 2 is a non-retirement NPS account. Private sector employees and self-
employed persons can invest in it on any business day and withdraw their money on
any business day without stiff exit penalties or lock-in. For Government employees, in
a press conference held on 10th December 2018, Finance Minister Aun Jaitley
announced that the NPS Tier 2 Account will be eligible for tax deduction under
Section 80C up to Rs 1.5 lakh per annum. The account would also have a lock-in of 3
years. These changes have not yet been officially notified.

NPS Tier 1 is a retirement account. It is the primary NPS account and you can only
open a Tier 2 account after opening a Tier 1 account.

NPS Tier 1 account can be opened under the NPS (Central Govt), NPS (State Govt),
NPS (Corporate) and NPS (All Citizens Models). All subscribers to NPS Tier 2 have
the freedom to select any fund manager within the NPS. Currently there are 8 fund
managers in the NPS including SBI, UTI, LIC, HDFC, ICICI, Kotak, Relaince and
Aditya Birla Sun Life Pension Fund.

There is no minimum balance requirement or minimum annual contribution for an

NPS Tier 2 account. There was previously a minimum balance requirement of Rs
2,000 at the end of each financial year, but this was removed by the PFRDA in 2016.
However if you do contribute, the minimum amount you can put in is Rs 250.

Eligibility

o You have to be a citizen of India. NRIs can also open it as long as they are
Indian citizens.

o You have to be between 18 and 65 years of age. Special rules apply if you
open an NPS Tier 1 account from the age of 60 – 65.

o You need to have an active Tier 1 account. However you can simultaneously
open a Tier 1 and Tier 2 account.

Page | 14
Minimum Investment: None

Maximum Investment: No upper limit

Lock-in: 3 years (For Government Employees). No lock-in for private sector

employees.

Returns: Depends on the asset allocation and pension funds chosen by you.

Tax on NPS Tier 2

NPS Tier 2 is eligible for tax deduction under Section 80C for government
employees. There is no clarity on how the gains in NPS Tier 2 will be taxed for such
employees. The Tier 2 account would also have a lock-in of 3 years. However these
tax rules have not yet been notified by the Government.There is no tax deduction on
NPS Tier 2 for private sector employees and the gains in the NPS Tier 2 are also
taxable at slab rate.

How to open an NPS Tier 2 account

If you have an Aadhar Card, PAN Card and bank account, you can open an NPS
account online at enps.nsdl.com or enps.karvy.com. These are the portals of the
Central Recordkeeping Agencies (CRAs) in the NPS. If you prefer to do this offline
(in person) you can go to your nearest NPS Point-of-Presence (PoP) which is typically
a designated branch of your bank. You can get a full list of NPS PoPs here.In either
case (online or offline account opening), you can make contributions, change key
details, change fund managers and initiate withdrawals online at enps.nsdl.com or
enps.karvy.com.

NPS Tier 2 Contribution

There is no minimum annual contribution to NPS Tier 2 and no maximum annual
contribution. The minimum initial contribution is Rs 1,000. You can contribute online
to NPS Tier 2 at enps.nsdl.com

NPS Tier 2 Withdrawal Rules

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There is no lock-in for NPS Tier 2. You can withdraw at any time from the NPS Tier
2 account. However, there is a lock-in of 3 years for government employees who are
investing in NPS Tier 2 to avail of a tax deduction. This new provision for
government employees was announced in a press conference in December 2018 but
has not yet been implemented.

NPS Tier 2 lock-in period

There is no lock-in period for NPS tier 2. However Government employees investing
in NPS Tier 2 will have a lock-in of 3 years, if they are availing tax benefits on their
investment.

NPS Tier 2 tax benefits

NPS Tier 2 does not have any tax benefits. The returns on NPS Tier 2 are also
taxable. However there will be a tax deduction for government employees under
Section 80C for investment in NPS Tier 2.

How to withdraw money from NPS Tier 2

You can withdraw money from NPS Tier 2 by logging into your account online at
enps.nsdl.org

How to close an NPS Tier 2 account

You can submit a request to close your NPS Tier 2 account by logging into your NPS account
online through enps.nsdl.org. Alternatively you can close your NPS Tier 2 account by
submitting an account closure form to your nearest NPS Point-of-Presence, typically your
bank.
Returns on NPS Tier 2

NPS Tier 2 does not have a fixed rate of interest. It gives returns by investing your
money in the 4 NPS asset classes – equities, corporate bonds, government bonds and
alternative assets. You can decide your split between these assets subject to certain
limits – 75% on equities and 5% on alternative assets. You also get a choice of 8 NPS
fund managers and you can change your selection once a year. Historically, an NPS
portfolio with at least a 50% equity allocation has given returns of 10-12%.

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Difference between Tier-1 and Tier-2:

Note-As per recent PFRDA circular dated 8th August, 2016, the minimum
contribution in Tier 1 Account is now reduced to Rs.1,000 a year. There will be no
minimum investment limit for Tier 2 account (Earlier, it was Rs.250). Also you no
need to maintain the minimum balance in Tier 2 account (Earlier, it was Rs.2000).-
From Budget 2016, the 40% withdrawal at the time of your retirement from NPS will
be tax-free. Rest 60% of the corpus will be treated taxable income as per old rules.

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What is Scheme Preference in NPS Account
In NPS, there are two types of options available to create your portfolio. They are as
below. Remember this scheme preference is not available for Government Employees
Tier 1 Account Type. However, they have a freedom to choose scheme preference in
their Tier 2 account. For rest of all investors, you have an option to choose scheme
preference.

Active Choice: Individual Funds

In this type of investment choice, Subscriber has the right to actively decide as to how
his / her contribution is to be invested, based on personal preference. The Subscriber
has to provide the PFM, Asset Class as well as percentage allocation to be done in
each scheme of the PFM.
There are four Asset Classes (Equity, Corporate debt, Government Bonds and
Alternative Investment Funds) from which the allocation is to be specified under
single PFM.
Asset class E - Equity and related instruments

 Asset class C - Corporate debt and related instruments

 Asset class G - Government Bonds and related instruments
 Asset Class A - Alternative Investment Funds including instruments like
CMBS,
 MBS, REITS, AIFs, Invlts etc.
 Subscriber can select multiple Asset Class under a single PFM as mentioned
below:
 Upto 50 years of age, the maximum permitted Equity Investment is 75% of
the
 total asset allocation.
 From 51 years and above, maximum permitted Equity Investment will be as
per
 the equity allocation matrix provided below. The tapering off of equity
allocation
 will be carried out as per the matrix on date of birth of Subscriber.
 Percentage contribution value cannot exceed 5% for Alternative Investment
 Funds.
 The total allocation across E, C, G and A asset classes must be equal to 100%.

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Equity Allocation Matrix for Active Choice

Age (years) Max. Equity

Allocation

Upto 50 75%

51 72.50%

52 70%

53 67.50%

54 65%

55 62.50%

56 60%

57 57.50%

58 55%

59 52.50%

60 & above 50%

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2. Auto Choice: Lifecycle Fund
NPS offers an easy option for those Subscribers who do not have the required
knowledge to manage their NPS investments. In this option, the investments will be
made in a life-cycle fund. Here, the proportion of funds invested across three asset
classes will be determined by a pre-defined portfolio (which would change as per age
of Subscriber).
A Subscriber who wants to automatically reduce exposure to more risky investment
options as he / she gets older, Auto Choice is the best option. As age increases,
theindividual’s exposure to Equity and Corporate Debt tends to decrease. Depending
upon the risk appetite of Subscriber, there are three different options available within
‘Auto Choice’ – Aggressive, Moderate and Conservative. The details of these Funds
are provided below:
(i) LC75 - Aggressive Life Cycle Fund: This Life cycle fund
provides a cap of 75% of the total assets for Equity investment.
The exposure in Equity Investments starts with 75% till 35 years of
age and gradually reduces as per the age of the Subscriber.

Age Asset Class E Asset Class C Asset Class G

Up to 35 years 75 10 15

36 years 71 11 18

37 years 67 12 21

38 years 63 13 24

39 years 59 14 27

40 years 55 15 30

41 years 51 16 33

42 years 47 17 36

43 years 43 18 39

44 years 39 19 42

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45 years 35 20 45

46 years 32 20 48

47 years 29 20 51

48 years 26 20 54

49 years 23 20 57

50 years 20 20 60

51 years 19 18 63

52 years 18 16 66

53 years 17 14 69

54 years 16 12 72

55 years & 15 10 75
above

(ii) LC50 - Moderate Life Cycle Fund: This Life cycle fund provides
a cap of 50% of the total assets for Equity investment. The
exposure in Equity Investments starts with 50% till 35 years of age
and gradually reduces as per the age of the Subscriber.

Age Asset Class E Asset Class C Asset Class G

Up to 35 years 50 30 20

36 years 48 29 23

37 years 46 28 26

38 years 44 27 29

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39 years 42 26 32

40 years 40 25 35

41 years 38 24 38

42 years 36 23 41

43 years 34 22 44

44 years 32 21 47

45 years 30 20 50

46 years 28 19 53

47 years 26 18 56

48 years 24 17 59

49 years 22 16 62

50 years 20 15 65

51 years 18 14 68

52 years 16 13 71

53 years 14 12 74

54 years 12 11 77

55 years & 10 10 80
above

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(iii)LC25 - Conservative Life Cycle Fund: This Life cycle fund provides a cap of
25% of the total assets for Equity investment. The exposure in Equity Investments
starts with 25% till 35 years of age and gradually reduces as per the age of the
Subscriber.

Age Asset Class E Asset Class C Asset Class G

Up to 35 years 25 45 30

36 years 24 43 33

37 years 23 41 36

38 years 22 39 39

39 years 21 37 42

40 years 20 35 45

41 years 19 33 48

42 years 18 31 51

43 years 17 29 54

44 years 16 27 57

45 years 15 25 60

46 years 14 23 63

47 years 13 21 66

48 years 12 19 69

49 years 11 17 72

50 years 10 15 75

51 years 9 13 78

52 years 8 11 81

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53 years 7 9 84

54 years 6 7 87

55 years & 5 5 90
above

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What are the types of funds available in NPS?
There are three types of NPS funds available. They are as below.

Asset Class E: Invest in equity market instruments. This is the riskier asset class
among all three. An equity investment generally refers to the buying and holding of
shares of stock on a stock market by individuals and firms in anticipation of income
from dividends and capital gains. Typically, equity holders receive voting rights,
meaning that they can vote on candidates for the board of directors (shown on a
diversification of the fund(s) and to obtain the skill of the professional fund managers
in charge of the fund(s)). An alternative, which is usually employed by large private
investors and pension funds, is to hold shares directly; in the institutional environment
many clients who own portfolios have what are called segregated funds, as opposed to
or in addition to the pooled mutual fund alternatives.

Asset Class G: Invest in fixed income instruments. The best example of this is central
government bond. This is the secured among all three. A government bond is a debt
security issued by a government to support government spending. Before investing in
government bonds, investors need to assess several risks associated with the country,
such as country risk, political risk, inflation risk and interest rate risk, although the
government usually has low credit risk.

Asset Class C: Invest in fixed income instruments. Examples of these are bonds
issued by firms or companies this neither risky like Asset Class E nor safe like Asset
A corporate bond is a debt security issued by a corporation and sold to investors. The
backing for the bond is usually the payment ability of the company, which is typically
money to be earned from future operations. In some cases, the company's physical
assets may be used as collateral for bonds.

Recently a new fund category by name Alternate investment has been introduced.

Page | 25
How to join NPS
POP-offline method
Procure your Permanent Retirement Account Number (PRAN) application form
"As a Subscriber between the age brackets of 18 to 60 years of age, you can procure
your PRAN application form from any of the Point of Presence - Service Providers
(POP-SP) you wish to register with. You can also procure the PRAN application form
from our website by clicking here."

"You have to ensure that your PRAN application form is filled up i.e. photograph,
signature, mandatory details, scheme preference details etc and also submit KYC
documentation with respect to proof of identity and proof of address. For detailed
information on NPS, please refer to the offer document prescribed by the Pension
Fund Regulatory and Development Authority (PFRDA)."

Submit PRAN application form to your nearest Point Of Presence - Service

Provider (POP-SP)
You can go to your nearest POP-SP and submit the PRAN application along with the
KYC documents. PRAN card will be sent to your correspondence address by CRA.

Track your PRAN application

At the time of submission of the PRAN application, POP-SP shall give you a receipt
number. You can track the status of your PRAN application by entering the receipt
number in the following link: https://cra-nsdl.com/CRA/pranCardStatusInput.do

Submit your first Contribution Slip

You are required to make your first contribution (minimum of Rs 500) at the time of
applying for registration to any POP-SP. For this, you will have to submit NCIS
(Instruction Slip) mentioning the details of the payment made towards your PRAN
account.

Page | 26
Online Method

1. Have the following ready

• Aadhaar or PAN. Aadhaar should have current address and mobile number, PAN
should be linked to bank account.
• Netbanking facility, debit or credit card.
• Passport size photograph (4-12 kb)
• Scanned image of signature (12 kb).
2. Log on to NPS Trust website ( enps.nsdl.com/eNPS/NationalPensionSystem. html )
Click on registration and choose ‘Individual’.
3. Enter your Aadhaar or PAN
You will be sent an OTP on the registered mobile number for verification.
4. Choose type of account
Start with Tier I account. If investing for other goals, you can also choose Tier II.
5. Key in OTP for authentication
If you chose Aadhaar, simple OTP authentication is required. If using PAN, your
bank will verify your details and charge Rs 125.

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6. Fill in personal details
If Aadhaar is used, many details will be prefi lled in the form. Submit to generate
acknowledgement number

7. Choose pension fund manager

Choose any of eight pension funds.
8. Choose investment mode in auto mode, equity allocation changes with age. In
active mode, you decide the mix
9. Choose investment mix
If you opt for active management, specify how to spread corpus across fund classes.
10. Assign your nominees
Give details of the people who should get the corpus in case the investor dies.
11. Upload photograph and signature
If not using Aadhaar, upload picture. Else, just upload signature.
12. Make contribution and get PRAN
Minimum amount is Rs 500 for Tier I and Rs 1,000 for Tier II.
You can invest through Netbanking, credit card and debit card.
After payment is approved, you will be allotted a PRAN
13. Download completed form
Take a print of form, stick your photo, sign it and mail within 90 days to CRA office.

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NPS App
Unlike before, now an investor can keep a tab on the status of his/her NPS account all
because of the introduction of the NPS app. As well as providing a user-friendly
experience for the subscriber, an employee can check the status of his/her account as
per the details seeded in the CRA web site. For this, their PRAN and password is
required. Listed below are some of the functions of the NPS app:
o View the status of one’s NPS account
o Request for a transaction between funds for Tier II employees.
o Change password on regular intervals to increase security.
o Change their basic contact details such as registered mobile number, email ID,
and telephone of one’s residence.
o Check account details - contributions, withdrawals, outstanding balance, etc.
o Get regular notifications related to the NPS scheme and its updates.
o Make contributions towards Tier I and Tier II NPS Account.
o Check the last five contributions made towards the NPS.
o Change schemes as per one’s preference and profitability.
o Change one’s address using their Aadhaar card.
o Request for a transaction statement that will be sent to the user’s email.

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How to calculate NPS
With the inputs given by you, you will get the corpus that will be accumulated by you
at the time of your retirement.
National Pension System (NPS) is a government sponsored pension scheme. It is a
contribution based scheme where the amount of pension to be received by you in the
future depends on the amount of corpus accumulated at the time of scheme's maturity.
The NPS calculator will show you the amount of corpus that will be accumulated by
you at the time of maturity and approximate amount of monthly pension to be
received by you.
The amount of corpus accumulated by the time you retire will depend on your
investment amount and returns generated.

Who can use NPS calculator?

NPS calculator can be used by anyone who is eligible to invest in the scheme. As per
the NPS rules, any Indian citizen between the ages of 18 years and 60 years can invest
in the scheme. The person will require complying with know-your-customer (KYC)
norms to start the investing in the scheme.

How to use this calculator

To know how much corpus will be accumulated by you, the calculator will require the
following details:
a) Your current age and the age you wish to retire
b) Amount that will be invested by you every month
c) Returns that you expect to earn from your NPS investment
d) Annuity period, i.e., number of years over which you wish to receive the monthly
pension in the post retirement years. You are required to mention this number in
years.
e) The percentage of pension wealth invested in the annuity plan means the percent of
accumulated corpus you will use to buy a pension plan. This cannot be below 40
percent if you withdraw at 60 years or more. If you withdraw before 60 years, it
cannot be below 80 percent.
f) Expected rate of interest on the annuity investment is the returns that you expect to
earn from your annuity (pension) during the post-retirement period.

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How the calculator works
With the inputs given by you, you will get the corpus that will be accumulated by you
at the time of your retirement. The corpus is calculated by using the principle of
power of compounding.

What the calculator shows

The NPS calculator will show you the details of your investment. It will show you the
amount invested by you during the accumulation phase of the scheme, interest earned
by you, and the total amount of corpus generated at the time of maturity.
The calculator also shows the break-up of details of the amount which is re-invested
to receive monthly pension and lump sum amount withdrawn by you. Based on the
expected returns from the annuity, it also shows the amount of monthly pension that
you will receive.

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NPS Structure
NPS has unbundled Architecture, where each function is performed by different
entities.

NPS is based on Personal retirement accounts (PRAs) created for individual members.
NPS accumulates savings into subscriber's PRA while he is working and use the
accumulations at retirement to procure a pension for the rest of his life.

PFRDA, a Prudent Regulator created by Government of India.

Central Record keeping lies with NSDL which is associated with various National
level projects for recordkeeping functions.

Renowned Financial Institutions covering Public/Private Sector Banks, NBFC,

Broking houses acting as POP.

Funds are managed by Fund Manager from Public & Private sector with proven track
record.

Axis Bank, functions as Trustee Bank.

Stock Holding Corporation of India Ltd, functions as custodian for NPS.

NPS has an unbundled Architecture, where each function is performed by a different

entity. NPS is a unique product which provides an opportunity for subscribers, to be
serviced by the intermediaries which are renowned in their areas, that too at low cost,
like:

At present, More than 50 POPs with over 14000 POP-SPs are registered for providing
NPS services.

At present, 7 Annuity service providers have been selected to provide the Annuity.

Page | 32
 NPS Architecture
 The new pension system is based on defined contributions. It uses the existing network
of bank branches, post offices etc to collect contributions. There is seamless transfer of
accumulations in case of change of employment and/or location. It also offers a basket
of investment choices and Fund Managers. The new pension system is voluntary.
 Individuals can normally exit at or after age 60 years from the pension system. At exit,
the individual would be required to invest at least 40 percent of pension wealth to
purchase an annuity. In case of Government employees, the annuity should provide
pension for the lifetime of the employee, his dependent parents and spouse at the time
of retirement. The individual would receive a lump-sum of the remaining pension
wealth, which he would be free to utilize. Individuals would have the flexibility to leave
the pension system prior to age 60. However, in this case, the mandatory annuitisation
would be 80% of the pension wealth.
 The participating entities (PFMs, CRA etc.) would give out easily understood
information about past performance & regular NAVs, so that the individual would be
able to make informed choices from the schemes.
 NPS account can be operated from anywhere in the country irrespective of employment
and geography.

 Subscribers can shift within the sector and from one sector to another.

 NPS is covered under the Income Tax Act, 1961 for tax benefits.

 Currently NPS has 'Exempt-Exempt-Taxation' (EET) where

o Investment up to 1 Lakh in Tier I account is exempted

o Withdrawal are subject to tax

 As per the Proposed Direct Tax Code (DTC), NPS will have Exempt-Exempt-Exempt
(EEE) status

o All investments (Up to Rs.1 Lakh) made under Tier I account under NPS are exempted

o No tax at the time of withdrawal

o There is no exemption on Investments made under Tier II account.

Page | 33
NPS ARCHITECTURE

Page | 34
Benefits of investing in NPS for pension purpose
Tax Benefit available under Tier I Account:

Employee Contribution:

Tax deduction u/s 80CCE for investments (10% of Basic & DA) within overall limit
of Rs. 1.50 lacs.

Exclusive tax savings provision: Tax deduction u/s 80CCD (1B) on contribution of
Rs.50,000.

Employer contribution: Tax deduction up to 10% of salary (Basic + DA) u/s 80CCD
(2) without any monetary ceiling

Low Cost – A very low-cost product with Fund Management Charges of 0.01%.

Superior returns – Attractive market linked returns

Flexibility of Investments – Subscriber may select a Pension Fund Manager (PFM)

of their choice. Subscriber is allowed to change PFM once during a Financial Year.
Subscribers may also define their asset allocation, which may be changed twice in a
given Financial Year.

Portability – Portable across jobs and geographies.

Online Access to NPS account – 24 X 7 X 365 through Web & Mobile App of
Central Recordkeeping Agency (CRA)

One-time shift to NPS - Existing corpus under Superannuation can one-time be

transferred to NPS without any Tax Incidence

Continuation in NPS scheme post retirement – Provision to contribute till 70years

or to differ withdrawal upto the age of 70 years.

Complete withdrawal for corpus less than Rs.2 lacs - In case total accumulated corpus
is less than Rs. 2 Lacs on attaining the age of 60 or later, subscriber may withdraw
entire corpus.

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NPS Scheme for NRI’s
Unlike other pension schemes, the introduction of the PRAN (Permanent Retirement
Account Number) has given even NRIs (non-resident Indians) the option of
subscribing to the Nation Pension scheme. That said, NRIs have to meet certain
criteria and they also have various investment options. They are:
o Should be between 18 years to 60 years old at the time of joining.

o Should provide the necessary KYC documents when applying.

o NRIs can download the NPS application form from the PFRDA’s member

portal. They then have to fill in the application, attach the necessary

documents and submit the application to the NRI bank branch in India.

o The deposit cheque of the initial contribution has to be attached as well.

o Next, the application will be digitized, and a PRAN will be allotted to the NRI

via SMS or email.

o From then on, contributions can be done online using their PRAN, though

there are some rules with regard to contributions:

o To open NPS account, an NRI has to make an initial contribution where the

minimum is Rs.500.

o The minimum amount per contribution is Rs.500 as well, and the minimum

contribution per year is Rs.6000.

o NRIs can choose from a number of options to make their investments. They

can choose between asset classes such as gilt funds, corporate bonds and

equities. They can either choose a auto choice investment (which covers all

asset classes) depending on their age, or an active investment - where they

themselves choose their investment amongst the asset classes.

Page | 36
Limitations of NPS
o No guarantee on returns: The NPS is not a defined benefit plan. It is a
defined contribution plan. The returns are market-linked and there is no
guarantee of returns. Investors have a choice of investing 100% of their
funds in Government securities wherein returns are more or less assured.
o Restriction on equity exposure: The exposure to equity investment is
restricted at 50%, thereby limiting the potential of higher returns.
o Liquidity: There are restrictions on premature withdrawal from Tier I
account making the scheme inflexible and illiquid. There is an option to
prematurely withdraw 20% of the amount but it leads to closure of the
account. Even on maturity, only 60% of the fund can be withdrawn and the
rest is to be compulsorily used to buy an annuity
o Tax on maturity proceeds: NPS currently comes under the EET (exempt,
exempt, tax) regime. Current laws state that the funds will be taxed at
withdrawal. Returns from annuity insurance plan obtained after retirement
will also be taxed.

Page | 37
How to choose Pension Fund Manager?
While choosing a pension fund manager, note that a single manager will manage
equity, corporate bond, government bond as well as alternative asset investments in
NPS. This is quite different from mutual funds where one can manage your equity
fund and another can look at your debt fund.

So how do you choose a suitable pension fund manager? Shardindu emphasised past
returns and returns in different asset classes as the key factors. “The simplest way
would be to go on the NPS Trust website and look at the returns that various fund
managers have generated over different periods of time. You should also decide what
your asset allocation will be and then look at the returns of each of these asset classes
in the same proportion as your asset allocation," he said.

For most moderate to aggressive allocations over longer terms in tier-1 accounts,
HDFC Pension Fund was the best performing fund manager, but SBI Pension Fund
has emerged a front runner in the past year. For conservative allocations, LIC Pension
Fund came on top.

However, historical returns do not differ significantly from each other because of
relatively tight investment norms. Suresh Sadagopan, founder, Ladder7 Financial
Advisory, said, “Their ranking keeps changing and the difference between different
NPS fund managers isn’t very large. That said, past returns would be the primary
criteria in picking an NPS fund manager. I advise my clients to only take a call on this
once every three years and not keep churning them every year," he said.

Another thing to keep in mind is track record. “The investor should look at the track
record of the group across other financial services like mutual funds, banking etc. and
how well they have done. Also, post sales service is critical. An all-inclusive stable
brand with long term return and ease of service should be the pension fund chosen,"
said Sumit Shukla, CEO of HDFC Pension Fund Ltd.

So choose carefully.

NPS is a government-sponsored pension scheme launched in 2004 for government

employees. It was later opened for all in 2009. During your tenure of work-life until
retirement, an NPS subscriber can contribute regularly in a pension account, withdraw
60% of the corpus in lump sum tax-free and convert the remaining 40% into an

Page | 38
annuity scheme post retirement. “You can claim your NPS contributions for a tax
deduction. Once a taxpayer has exhausted the limit of ₹1.5 lakh available under
section 80 (C), an additional ₹50,000 is allowed under section 80CCD(1B)," said
Archit Gupta, CEO of Clear Tax, a tax e-filing platform. “This is one of the major
advantages for NPS, as this section is solely available just for NPS contributions,"
said Vishal Dhawan, founder of Plan Ahead Wealth Advisors. As a subscriber, you
have to choose a pension fund manager (PFM) and decide where you want your NPS
contributions to be invested. The two investment choices available are active choice
and auto choice. In active choice, you can decide your contribution and percentage
allocation to the different asset classes: equity, corporate bond, government bond and
alternative infrastructure funds. Recently the government has allowed its subscribers
to allocate 75% of their contribution value to equity schemes, this number earlier was
50%. However, the total allocation across the specified asset classes must be equal to
100%. “If the subscriber should opt for a 75% exposure, depends on the number of
years left for retirement. If one has around 25 years to go for retirement, he or she can
invest with 75% exposure to equities," said Sadagopan. So for someone who is
already 50 years, the risk element has to be moderate, he added. In auto choice, the
scheme setup and allocation will be determined by the system itself based upon your
age at the time of registration. In auto choice, you can choose between moderate,
aggressive and conservative setups that will automatically make changes to your
investment according to the risk profile you pick and your age.

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List of NPS Fund Managers
Currently, there are 8 Fund Managers who are managing our NPS corpus and they are
as below.

 Birla Sun Life Pension Scheme

 HDFC Pension Fund

 ICICI Prudential Pension Fund

 Kotak Pension Fund

 LIC Pension Fund

 Reliance Capital Pension Fund

 SBI Pension Fund

 UTI Retirement Solutions

The Government employees NPS accounts and contributions are managed by LIC
Pension Fund, SBI Pension Fund and UTI.

Under this category, up to 15% of the corpus can only be invested in Equity Fund.
The remaining corpus is allocated to Corporate Bonds and Govt securities.

The private sector employees and other individuals can also invest in NPS. The
Equity fund threshold limit is 75% in this case. These individuals can select any of the
two investment options to select scheme preferences.

We are comparing between these three banks

 LIC Pension Fund

 SBI Pension Fund

 UTI Retirement Solutions

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NPS Returns for 2018 – Best Performing NPS Tier 1 – Scheme E Fund Returns

Now let us concentrate on NPS Returns for 2018 in Tier 1 Scheme E. The returns are
as below.

# The best performing NPS Pension Fund manager under NPS Tier-1 Scheme E is
UTI Retirement Solutions. This scheme has generated returns of around 15.15% in the
last 5 years. Also, since inception, it is 12.11%.

# The benchmark used for Equity plans is Nifty 50 Index.

# Also, weightage of top 5 holdings is less in case of UTI. It constitutes 24.81% of the
overall portfolio. Kotak Fund holding even the Mutual Funds also like Birla Sunlife
Top 100, Birla Sunlife Frontline Equity and SBI Magnum Multiplier. Seems strange
to me as how they managing the expenses. Because there will be double expenses like
Kotak expenses and also the Mutual Fund Expenses.

# The clear winner in this category is UTI followed by SBI.

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NPS Returns for 2018 – Best Performing NPS Tier 1 – Scheme C (Corporate)
Fund Returns

Now let us concentrate on NPS Returns for 2018 in Tier 1 Scheme C. The returns are
as below.

# The best performing NPS Pension Fund manager under NPS Tier-1 Scheme C is
ICICI. This scheme has generated returns of around 9.79% in the last 5 years. Also,
since inception, it is 10.52%.

# SBI’s AUM is highest here with around 1006.99 Cr followed by HDFC (572.52 Cr)
and ICICI (540.47 Cr).

# The clear winner in this category is ICICI followed by SBI.

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NPS Returns for 2018 – Best Performing NPS Tier 1 – Scheme G (Govt
Securities) Fund Returns

Now let us look for NPS Returns for 2018 in NPS Tier 1 and Scheme G (Govt
Securities).

# In this category, the higher and consistent performer is SBI Pension Fund.

# Have you noticed the less returns of all these funds since a year? The reason for
underperformance by all these funds is that RBI paused the interest rate since few
months due to higher inflation, higher crude price and for some other reasons. Due to
this, the fund performance decreased drastically. Because these funds holding longer
maturity Government bonds which are prone to interest rate movement.

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NPS Returns for 2018 – Best Performing NPS Tier 2 – Scheme E Fund Returns

Let us now move to Tier 2 performance of NPS Returns 2018.

# The best performing NPS Pension Fund manager under NPS Tier-1 Scheme E is
UTI Retirement Solutions. This scheme has generated returns of around 15.09% in the
last 5 years. Also, since inception, it is 10.24%.

# The benchmark used for Equity plans is Nifty 50 Index.

# Also, weightage of top 5 holdings is less in case of UTI. It constitutes 27.47% of the
overall portfolio. Kotak Fund holding even the Mutual Funds also like Birla Sunlife
Top 100, Birla Sunlife Frontline Equity, ICICI Focused Equity and SBI Bluechip
Fund. Seems strange to me as how they managing the expenses. Because there will be
double expenses like Kotak expenses and also the Mutual Fund Expenses.

# The clear winner in this category is UTI followed by SBI.

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NPS Returns for 2018 – Best Performing NPS Tier 2 – Scheme C (Corporate)
Fund Returns

Now let us concentrate on NPS Returns for 2018 in Tier 2 Scheme C. The returns are
as below.

# In this Scheme the winner is ICICI pension fund with 5 years return 9.69% and
followed by Reliance Pension Fund.

# The highest AUM is managed by SBI Pension Fund and followed by ICICI Pension
Fund.

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NPS Returns for 2018 – Best Performing NPS Tier 2 – Scheme G (Govt
Securities) Fund Returns

Let us not check the NPS Returns for 2018 for Tier 2-Scheme G (Government
Securities).

# In this category the winner is SBI Pension Fund.

# Have you noticed the less returns of all these funds since a year? The reason for
underperformance by all these funds is that RBI paused the interest rate since few
months due to higher inflation, higher crude price and for some other reasons. Due to
this, the fund performance decreased drastically. Because these funds holding longer
maturity Government bonds which are prone to interest rate movement.

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Who is the best NPS Fund Manager for 2018?
In above charts we the NPS Returns for 2018. Now based on those performance
returns, who is the best NPS Fund Manager? To identify the best NPS fund manager,
I considered last 3 years returns of each scheme. I purposely avoided 5 years returns
as two funds not yet completed 5 years.

In below chart, I show you the highest return generated fund manager for each asset
class for a different time period of 1 year, 2 years and 3 years. The data looks like
below.

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Hope this much information is enough for you to judge how your NPS is performing.
Do remember that NPS comes with lock-in, annuity you buy will be taxable and you
have to stick to limited fund managers. Never invest in NPS with the sole intention of
tax saving.

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Chapter 3
Research methodology
It is defined as a highly intellectual human activity used in the investigation of nature
and matter and deals specifically with the manner in which data is collected, analyzed
and interpreted. A system of models, procedures and techniques used to find the result
of research problem. And a research design is the specification of methods and
procedures for acquiring the information needed. It is overall operation pattern or
framework of the project that stipulates what information is to be collected from which
source by what procedures.

 Data collection
The methodology reveals the methods of data collection. For this purpose of study
primary as well as secondary data is taken

 Primary data

Primary Data collection is the process of gathering and measuring information on

targeted variables in an established system, which then enables one to answer relevant
questions and evaluate outcomes. Data collection is a component of research in all
fields of study including physical and social sciences, humanities,and business. While
methods vary by discipline, the emphasis on ensuring accurate and honest collection
remains the same. The goal for all data collection is to capture quality evidence that
allows analysis to lead to the formulation of convincing and credible answers to the
questions that have been posed.

 Secondary data

Secondary data is the data which is available in readymade form and which is already
used by people for some purposes. There may be various sources of secondary data
such as-newspapers, magazines, journals, books, reports, documents and other
published information

Secondary data is collected from the several sources which includes database provided
by websites of Kotak Mahindra bank and union bank of India. It is also collected form
various journals, and annual reports of selected banks.

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2.1. Period of the study

This research study covers data as on 31st march,2018.

2.2. Objectives of the study

The main objective of the study is to analyze and compare the schemes of different
banks on the basis of their data.

o To study the working of NPS

o To analyze different modes in NPS
o To evaluate the working of the scheme
o To study investment options for funds allocation
o To study the tax benefits under the scheme
o To study relationship between Tier 1 and Tier 2
o To study correlation between Equities, Corporate bonds & Govt.
securities of Tier 1 and Tier 2

2.3. Limitations of the Study:

This study is based on primary as well as secondary data but it doesn’t cover every
phenomenon of the comparison. It limits only to the returns comparison between
banks and AUM of the three banks selected

It gives an overview but not a deep dive into the scheme with different banks.

2.4. Nature of the study

Since one of the objective is to acquire deeper insight into the various pertinent aspects
of the problem. Thus the study can be turned as exploratory in nature. The researcher
has also utilized the facts and information available by various primary sources to make
critical evaluation and calculated and analyzed the data using various statistical tools
and techniques. Thus, from this point of view, the nature of study becomes analytical
also.

2.5. Scope of the study

The scope of the study is very wide. All the banks registered under the banking act can
be the census for the study. But considering an individual limitations, as an individual

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researcher, it may be beyond the capacity of researcher to pursue the research study on
hundred percentages in enumerative basis. However this research study has been
carried out by the researcher with one public sector bank and one private sector bank
only.

2.6. Significance of the study

This research study is based on primary as well as secondary data which tells about
each person’s perspective on the scheme.It tells us that people aren’t much aware of the
scheme as it pertains to the youth also.

2.7. Sample size and data collection

Sample size measures the number of individual samples measured or observations
used in a survey or experiment
Data can be collected using three main types of surveys: censuses, sample surveys,
and administrative data
The sample size is of 65 people and the data collection technique used is surveys
through google forms.
2.8. SAMPLE DESIGN

Data has been presented with the help of pie diagram.

Pie diagram

A pie graph (or pie chart) is a specialized graph used in statistics. The independent
variable is plotted around a circle in either a clockwise direction or a
counterclockwise direction.The dependent variable (usually a percentage) is rendered
as an arc whose measure is proportional to the magnitude of the quantity. Each arc is
depicted by constructing radial lines from its ends to the center of the circle, creating a
wedge-shaped "slice. “The independent variable can attain a finite number of discrete
values (for example, five).The dependent variable can attain any value from zero to
100 percent.

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Chapter 4
Literature Review

o -Sanyal, Ayanendu and Singh Charan in their paper has pointed out that the
main purpose of pensions are smoothening of consumption and mitigating
longevity risks, poverty and inter-intra generation inequality. Universal
pension scheme are found to do this successfully for each and every person of
this country. In general, broadly assuming that the population of India above
60 years is 10 crore and if a universal pension of about Rs. 6,000 per annum is
awarded to all of them. The annual fiscal implication would touch around, Rs
60,000 crore which was less than the food subsidy or even the petroleum
subsidy for 2013-14. It was found that if their suggestions were introduced the
working cohorts of India majority of whose future lies in uncertainty shall start
living under the umbrella of certainty.

o -Sane Renuka and Thomas Susan

The way forward for India National Pension System: has
recommended some of the immediate steps after the passing of the PFRDA
Bill at the end of 2013.(a)establishing portability, (b) improving investment
choices, (c) rationalising investment guidelines for returns over the long-term,
and making tax policies consistent, (d) improving transparency, (e) reverting
to a strict focus on low costs of managing the NPS, (f) increasing the visibility
and access of this product while ensuring that protection of customer rights
against mis-sales and fraud. In addition, the PFRDA can also

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Chapter 5
Data analysis , interpretation & presentation
NPS Returns for 2018 – Who is best NPS Fund Manager?
Now let us concentrate on NPS Returns for 2018 and try to find who the best NPS
Fund Manager is for 2018 or which is the best NPS fund for 2018.

NPS Returns for 2018- Best NPS Fund under Central Government Scheme

As I said above, this scheme is meant for Central Government Employees only. Here,
we can find only three fund managers and the returns are as below.

# Fund Managers managing the scheme since 1st April 2008.

# SBI Manages the highest AUM (29254.83 Cr) followed by UTI (27490.44 Cr) and
LIC (25532.34 Cr).

# When you compare 10 years returns, SBI tops with almost 10% returns (9.94%) and
then LIC and UTI almost generated around 9.6% returns.

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#All Fund Managers debt portfolio hold Govt Bonds which maturing from 2030 to
around 2045. Hence, any interest rate fluctuation will impact the return badly.
Because of longer the maturity period higher the interest rate impact on bond.

# Top 3 holdings of SBI Fund Manager is G-Sec, Banking and Financial Institutions.
LIC Fund Manager holding is Govt. Sec, Finance, Banks. However, with UTI, it is
Banks, Other credit granting, Housing credit Institutions.

# Benchmark return for 5 years is 9.03%, 3 years is 7.3%, 2 years is 9.48% and for 1
year it is 4.53%. Hence, all three fund managers have beaten the benchmark
consistently since 5 years.

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NPS Returns for 2018- Best NPS Fund under State Government Scheme
Now let us go with NPS Returns for 2018 under State Government Scheme. Here also
you will find 3 fund managers like central government NPS. Let us see the
performance.

# Fund Managers managing the scheme since 25th June 2009.

# SBI Manages the highest AUM (37751.06 Cr) followed by UTI (36790.49 Cr) and
LIC (36476.09 Cr).

# When you compare 9 years returns, LIC tops with 9.66% returns and then UTI
(9.6%) and SBI (9.49%).

#All Fund Managers debt portfolio hold Govt Bonds which maturing from 2030 (UTI
holding bond maturing in the year of 2029) to around 2045. Hence, any interest rate
fluctuation will impact the return badly. Because of longer the maturity period higher
the interest rate impact on bond.

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# Top 3 holdings of SBI Fund Manager is G-Sec, Banking, and Financial Institutions.
LIC Fund Manager holding is Govt. Sec, Finance, and Banks. However, with UTI, it
is Banks, Other credit granting, Housing credit Institutions.

# Benchmark return for 5 years is 9.03%, 3 years is 7.3%, 2 years is 9.48% and for 1
year it is 4.53%. Hence, all three fund managers have beaten the benchmark
consistently since 5 years.

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Comparison of asset under management of trusts
AUM as of 31st, March 2018. In Crores .
Scheme
LIC SBI UTI
Scheme Central Govt. 26379.36 30,222.90 28,352.47
Scheme State Govt. 38095.11 39,482.15 38,411.37
Scheme NPS Lite 859.27 1,252.15 847.85
Scheme Corporate CG 2586.14 12,260.20 00
Scheme E Tier- I 355.58 1,578.50 225.40
Scheme C Tier- I 231.72 1,077.81 139.80
Scheme G Tier- I 342.59 1,912.47 209.06
Scheme E Tier – II 8.98 72.20 15.33
Scheme C Tier- II 6.51 54.06 9.87
Scheme G Tier- II 8.77 67.07 11.81
Scheme Atal Pension 1255.84 1,302.09 1259.93
Yojana (APY)
Scheme A Tier I 0.39 1.63 0.38
Scheme A Tier II 00 00 00
Total 70130.26 89,283.21 69,483.27

In finance, assets under management (AUM), sometimes called funds under

management (FUM), measures the total market value of all the financial assets
which a financial institution such as a mutual fund, venture capital firm, or broker
manages on behalf of its clients and themselves.
Assets under management (AUM) is very popular within the financial industry as a
measure of size and success of an investment management firm, compared with its
history of assets under management in previous periods, and compared with the firm's
competitors.
Pension Fund Regulatory and Development Authority (PFRDA) that regulates the
National Pension Scheme (NPS) expects assets under management (AUM) to touch
Rs 2.85 lakh crore in FY19, from Rs 2.3 lakh crore in the last financial year.
It tells us about how well a trust is performing, in this case the SBI is holding
maximum assets under management with regarding to the scheme.

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Findings and analysis

INTERPRETATION:-
o The survey consists mainly of the age group of 18-30.
o No one is from the age group 51-65 because of less internet influence among
them.

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INTERPRETATION:-
o Around 60% of the audience is aware of the scheme.
o But even if they are aware they have not registered under the scheme

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INTERPRETATION:-
o Majority being the youth have not enrolled under NPS.
o Irrespective of people being aware of the scheme they have not enrolled under
the scheme.

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INTERPRETATION:-
o Majority of the audience have not enrolled under the scheme.
o Then majority of the audience prefers LIC due to its market position.
o Then with the next best comes SBI and remaining has less of the market share.

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INTERPRETATION:-
o majority of people have not faced any difficulty while registering under the
scheme
o Irrespective of not facing any difficulty most of the people have not registered
under NPS.

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INTERPRETATION:-
o In the above pie diagram 80% of the people prefer online mode and the
remaining 20% opt the offline mode.
This shows the easy accessibility of NPS

Page | 63
INTERPRETATION:-

o The above pie diagram shows that 47.7% are unaware of the benefits of NPS.
o This shows the need of awareness of National Pension Scheme among the
people.

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INTERPRETATION:-

o The above pie diagram shows some interesting facts:

o Only 41.5% of audience think that this scheme is beneficial
o 49.2% of the audience are not sure about the usefulness of it
o 9.2% of the people think it is not beneficial
o We can say that less than half of the people know the benefits of NPS and
other half of the people are partially aware of the benefits. This shows the lack
of awareness of NPS among the audience and also their lack of interest in
pension schemes..

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Chapter 6
Conclusion & Suggestion

NPS is a government promoted savings vehicle aimed to generate old-age/ retirement

corpus by encouraging regular savings.Though it provides greater tax incentives
amounting to ₹200,000, it also comes with a huge lock-in period (also one of the
longest). This makes the investment illiquid.

Moreover, the entire amount is not available at retirement. 40% of the NPS corpus (or
80% of the corpus in case of partial withdrawal from NPS) has to necessarily be
invested in an annuity. Making the investment all the more rigid and inflexible.

However, the investment has very less expense ratio (comparatively) and has a very
low risk.On the other hand, other investment options such as ELSS have higher risks
and returns with a lower lock-in period.Investment decision in an NPS or other
investment class is ideally a function of an investor’s risk-return appetite, investment
horizon, and investment objective.

It is the Government bonds which has stealed almost all the shows. Their position
remains more or less the same irrespective of tier-I or Tier-II which is also a clear
indication that public at large has higher faith on Government securities.

Talking about the pension fund managers it differs from tier to tier and from auto and
active choice so it’s very subjective on which to select.

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NPS In 10 Simple Points :

1. NPS is a pension scheme by Government similar to 401k in US – minimum is

Rs 6000 per year
2. NPS is quasi-EET – Principle is tax-exempt, 60% of profit is taxable and 40%
is tax-free
3. Upto Rs. 50,000 investment per year under 80CCD(1b) is tax-free. This is
over and above Section 80c limit of 1.5L
4. You can allocate investment across following assets: Equity (E), Corporate
Debt (C) and Govt. Debt (G). The returns on your investment will depend on
the performance of the portfolio.
5. Two options to allocate: Auto allocation where allocation changes based on
your age; and Active allocation where you do it yourself, equity is capped at
50% in this case.
6. Your money is locked in till the age of 60! Before you turn 60 (and after 10
years of creating NPS account), you can withdraw for special reasons ( max
20%) and opt for annuity (80%)
7. After you turn 60: 60% can be withdrawn rest 40% will be used to buy an
annuity
8. 8. You can chose the annuity scheme: annuity is like opposite of SIP – you get
money back every month.
9. Charges: account opening:Rs 50, registration: Rs 125; 0.25% + Rs. 4 per
transaction; Rs. 190 AMC + 0.0275% of AUM.
10. To join: you need to be 18 to 60 years old and have a KYC. For offline –
search for POP (Point of Presence) near you.

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Chapter 7
Bibliography
A bibliography is a list of all of the sources you have used (whether referenced or not)
in the process of researching your work.

Articles
Basavaraj Tonagatti is the man behind this blog. He is SEBI Registered Investment
Adviser who is practicing Fee-Only Financial Planning Process and also an
Independent Certified Financial Planner (CFP), engaged in blogging since 7 years.
BasuNivesh blog is ranked as one among India's Top 10 Personal Finance Blog.

Articles from newspapers such as MINT, ECONOMIC TIMES.

Websites
o www.paisabazaar.com
o https://groww.in
o https://www.npscra.nsdl.co.in/
o https://en.wikipedia.org
o https://www.policybazaar.com
o https://www.basunivesh.com/
o https://economictimes.indiatimes.com
o https://www.sbi.co.in
o https://www.utimf.com
o http://www.licpensionfund.in
o http://www.npstrust.org.in/content/pension-calculator

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Chapter 8
Annexure

Survey on NPS among different banks

1. Name
_________________
2. Age group
o 18-30
o 31-50
o 51-65
3. Are you aware of the National Pension Scheme?
o Yes
o No
4. Have you already enrolled under NPS?
o Yes
o No
5. Under which Pension Fund Manager have you enrolled?
o SBI Pension Funds
o UTI Retirement Solutions
o HDFC Pension Fund
o ICICI Prudential Pension Fund
o Kotak Pension Fund
o Reliance capital Pension Fund
o Birla Sun Life Pension Management Ltd.
o LIC Pension Fund
o Other
o None
6. Did you faced any difficulty while enrolling under NPS?
o Yes
o No
7. What will you prefer ?
o Online mode (eNPS)
o Offline mode (POP)

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8. Are you aware of the tax benefits under the scheme?
o Yes
o No
9. Which tier will you prefer .
o TIER 1 (account wherein the money in the account cannot be withdrawn till
the person reaches the age of 60.)
o TIER 2 (account is more like a savings account and there is no restriction on
withdrawal of money, at any point in time whatsoever.)
10. Do you find it worth investing under NPS?
o Yes
o No
o Maybe

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