NPS LITE- IT’S SUCCESS/DRAWBACKS WITH RECOMMENDATIONS

NATIONAL LAW UNIVERSITY, JODHPUR

WINTER SEMESTER

(JANUARY-MAY, 2020)

Submitted By: Submitted To:

Prateek Jain Dr. Seema Arora
Roll No.-1229 Deputy Director, NLU-Jodhpur
IV Semester Faculty of Group Insurance &
MBA Insurance Pension

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 ACKNOWLEDGEMENT

The Project on “NPS LITE- IT’S SUCCESS/DRAWBACKS WITH RECOMMENDATIONS” has been
given to me as a part of the curriculum.

First of all, I pay regards to Almighty God whose blessing came at the right time & in plenty to
enable us to complete this project. Any project completed or done in isolation is unthinkable.
This project, although prepared by me, is a culmination of efforts of a lots of people. Firstly, I
would like to thank Dr. Seema Arora Mam, Deputy Director & Faculty of Group Insurance
& Pension, National Law University, Jodhpur for her valuable suggestions towards the
making of this project.

I also express my profound gratitude to my parents for their direct/indirect support during the
entire course of this research.

This study bears testimony to the active encouragement and guidance of my friends and well-
wishers. This accomplishment would not have been possible without them. Last, but far from the
least, I would express my gratitude towards the Almighty for obvious reasons.

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 TABLE OF CONTENTS

CHAPTER PAGE NO.

Title Page 1
Acknowledgement 2
List of Figures 5
List of Tables 5
Abstract 6
1. INTRODUCTION 7
1.1 Background of the study 7
1.2 What is the national pension scheme NPS-Lite? 7
1.3 Distinguishing features of NPS -Swavalamban 8
2. EVOLUTION & CURENT STATUS OF NPS-LITE 10
2.1.Evolution and design of NPS-Swavalamban 10
2.2.Methodology 14
2.2.1. Analysis of secondary data 14
2.2.2. Survey of Aggregators 14
2.2.3. Analysis of household financial data 16
2.3.Current Status 17
3. ELIGIBILTY CRITERIA FOR NPS-LITE & ENROLLMENT PROCESS 19
3.1.Who is eligible for the national pension scheme NPS- Lite 19
3.2.Enrollment 19
4. BENEFITS & DRWABACKS OF NPS-LITE 21
4.1.Benefits of NPS-Lite 21
4.2.Drawbacks of NPS-Lite 21
5. WITHDRAWAL FROM NPS – LITE 23
5.1.Exit at the age of 60 23
5.2.Exit before the age of 60 23
5.3.Withdrawal due to death of the subscriber 23
6. RECOMMENDATION 24

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 7. CONCLUSION 25
8. REFERENCES 26

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 LIST OF FIGURES
Figure Page
Figure Name
No. No.
India Old Age Dependency
1
Ratio (1950-2100) 10
Subscribers enrolled and total
contributions per year (2010- 2
2013) 17
Total subscribers by gender of
3
subscriber 18
Percentage of subscribers with
4
bank accounts 18

LIST OF TABLES
Table Page
Table Name
No. No.
Summary of
surveyed 1 15
Aggregators
Nature of Data
from Financial 2 16
Institution

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 ABSTRACT

This project covers NPS Lite, its eligibility, benefits, drawbacks and NPS Lite forms. NPS Lite is
designed in such a way it has a low-cost structure when compared to NPS. NPS Lite is based on
a group servicing model. All Indians are eligible to invest in the NPS lite scheme. There is no
restriction on the minimum amount of contribution every year. Under NPS Lite, the asset
allocation is such that 55% of the assets are an investment in government securities, 40% in
corporate bonds and the rest in equity. Hence NPS Lite is more secure and has a higher
probability of offering predictable and stable returns. Scrip box’s NPS calculator is one such tool
that estimates the probable returns from NPS schemes. Upon maturity, the subscriber can
withdraw a maximum of 60% of the accumulated corpus in lump sum. Furthermore, the
subscriber has to use a minimum of 40% of the accumulated corpus for purchasing an annuity
scheme.

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CHAPTER 1
INTRODUCTION

1.1 BACKGROUND OF THE STUDY

The Pension Fund Regulatory and Development Authority (PFRDA) has introduced the National
Pension System-Lite (NPS-Lite) with effect from April 01, 2010. PFRDA has appointed NSDL
e-Governance Infrastructure Limited as Central Recordkeeping Agency (CRA) for NPS - Lite.
CRA is the first of its kind venture in India which will carry out the functions of Record
Keeping, Administration and Customer Service for all subscribers under NPS - Lite.

The NPS-Lite is basically designed with the intention to secure the future of the people who are
economically disadvantaged and who are not financially well to do. Towards this endeavor
NSDL has developed a NPS Lite system on a low charge structure. The servicing model is of
NPS Lite is based on group servicing. The people forming part of this low income groups will be
represented through their organizations known as "Aggregators" who would facilitate in
subscriber registration, transfer of pension contributions and subscriber maintenance functions.
Subscribers in the age group of 18 to 60 can join NPS - Lite through the aggregator and
contribute till the age of 60.

1.2 WHAT IS THE NATIONAL PENSION SCHEME NPS-LITE?

The National Pension System Lite (NPS Lite) was launched on April 1st 2010. Also known as
NPS Swavalamban, this scheme aims to target the poor. NPS Lite helps secure the future of
economically disadvantaged people. Any person who is in the age group of 18-60 years can join
this scheme.

NSDL e-Governance Infrastructure Limited has been appointed as Central Recordkeeping

Agency (CRA) for NPS – Lite by the Pension Fund Regulatory and Development Authority
(PFRDA). NPS – Lite is designed in such a way it has a low-cost structure when compared to
NPS. NPS Lite is based on a group servicing model. There are organizations called
‘Aggregators’ who will represent a group of low-income subscribers. These aggregators facilitate
the registration, account maintenance, and transfer of pension contributions.

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All Indians are eligible to invest in the NPS lite scheme. There is no restriction on the minimum
amount of contribution every year. Moreover, the subscribers can make the contribution at any
time of the year at their convenience.

Under NPS Lite, the asset allocation is such that 55% of the assets are an investment in
government securities, 40% in corporate bonds and the rest in equity. Hence NPS Lite is more
secure and has a higher probability of offering predictable and stable returns. Also, one can use
an NPS calculator to estimate returns from NPS schemes.

Upon maturity, the subscriber can withdraw a maximum of 60% of the accumulated corpus in
lump sum. This amount is entirely tax-free. Furthermore, the subscriber has to use a minimum of
40% of the accumulated corpus for purchasing an annuity scheme.

"NPS -Swavalamban Model" is designed to ensure ultra-low administrative and transactional

costs, so as to make small investments viable. Swavalamban Yojana is a scheme announced by
the Government of India under which Government will contribute Rs. 1000 per year to each NPS
-Swavalamban account opened in year 2010-2011,2011-2012 ,2012-2013 for five years as under:

 Account opened in 2010-2011 will get the benefit till 2014-2015

 Account opened in 2011-2012 will get the benefit till 2015-2016
 Account opened in 2012-2013 will get the benefit till 2016-2017

NPS – Swavalamban account opened in the period 2013-2014 to 2016-2017 will get the
Swavalamban benefit up to 2016-17.

1.3 DISTINGUISHING FEATURES OF NPS -SWAVALAMBAN:

 Voluntary: Open to eligible citizens of India, in the age group of 18–60 years.
Subscriber is free to choose the amount he/she wants to invest every year.
 Simple: Eligible individuals in the unorganized sector can open an account through their
Aggregator and get an Individual subscriber (NPS - Swavalamban) Account.

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  Safe: Regulated by PFRDA, with transparent investment norms, regular monitoring and
performance review of fund managers by NPS Trust.
 Economical: Ultra-low cost structure with no minimum amount required per annum or
per contribution.

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CHAPTER 2
EVOLUTION & CURENT STATUS OF NPS-LITE (SWAVALAMBAN)

2.1 EVOLUTION AND DESIGN OF NPS-SWAVALAMBAN

India’s old age dependency ratio or the proportion of retired to working age population is
projected to increase from 9.5% in 2015 to 28% in 2060 (Figure 2.1.1). India’s elderly
population (aged 65 years and above) is projected to increase from 5.4% of our population in
2015 to 16.7% by 2060, while the share of working aged (between 20 and 64 years) in the
population will increase by just 3% in the same time period. With such a rise in the old age
dependency ratio, India could face what is termed a ‘demographic echo’- the prospect of fewer
working age individuals having to support a large old age population-which could have a
debilitating impact on our economy and society. Given India’s changing demographic profile, it
is essential that we plan for the post-retirement financial wellbeing of a large section of our
population.

50
47
45
40
38.8
35
Old Age
30 Dependency
28 Ratio
25
20
17.3
15
8.7 9.5
10 6.4 7.6
5
0
1950 1960 1980 2000 2005 2010 2015 2020 2040 2060 2080 2100

Figure 1: India Old Age Dependency Ratio (1950-2100)

The pensions system in economically advanced, industrialised nations is typically categorised

into three core pillars. Pillar I forms the benefit extended to the citizen by the State, Pillar II is in
the form of mandatory retirement savings at the level of the employer and Pillar III is comprised
of voluntary retirement savings, over and above the other pillars. While this structure works

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effectively in most countries due to organised nature of their respective workforces, what makes
the challenge of extending pensions benefit in India unique is the highly informal nature of our
economy, which precludes investment in Pillar II savings. It is estimated that almost 85% of
India’s 46 crore workforce is engaged in the unorganised sector. Defined broadly, unorganised
sector workers are those who do not have contracted employment with a formal sector employer
and are engaged as home-based, self-employed or wage workers. As the National Commission
for Enterprises in the Unorganised Sector (NCEUS) argues, the unorganised sector workforce
does not enjoy three types of social protection - employment security (no protection against
arbitrary dismissal), work security (no protection against accident and health risks at the
workplace) and social security (health benefits, pensions, and maternity benefits). As Kannan &
Bremen (2013) argue, recent employment trends confirm the growing in formalisation of the
workforce, even within the formal sector. For example, the share of informal workers in the
formal sector has increased from 42% in 2000 to 51% in 2010.

Compounding the lack of access to pensions benefit under social security is the fact that the
resources offered by other possible sources of post-retirement income like support from family
members and government benefits remain meagre. For instance, it is estimated that only about
7% of all elderly households receive remittances from family living elsewhere. While a majority
of India’s elderly live in joint, three-generational families, support from joint families is less
likely for households in the poorest income quintile and those with nominal educational levelsii.
India spends approximately 1.3% of annual GDP on the provision of public pensions,
significantly lesser than the 2.5% benchmark for countries with comparable incomes; only 17%
of elderly households in India receive some kind of government benefit, including the benefits
from the National Old Age Pension Scheme (NOAPS)iii. Additionally, private sources of
savings in India like household assets, for instance, remain predominantly invested in tangible,
physical assets like land, housing, livestock and jewelleries. The high correlation of these assets
with the fluctuations in the local economy combined with their illiquid and non-tradable nature
make them unsuitable investment options for households saving towards retirement.

Given these unique set of challenges and the policy imperative posed by an ageing demographic
profile, the Government of India launched the National Pension System (NPS), a scheme that
attempts to provide adequate retirement income to every citizen of India. NPS aims to ensure

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financial security during old age by encouraging citizens to contribute to retirement savings. In
September 2010, the GOI introduced the NPS-Swavalamban (NPS- S) to encourage citizens
engaged in the unorganised sector to save towards retirement. Under the scheme, GOI
contributes Rs.1000 per year (currently, for a period of five years ending 2016-17) to every NPS
account that meets the following criteria:

 The subscriber should not be covered under any employer assisted retirement benefit
scheme.
 The subscriber should not be covered under social security schemes falling under the
purview of any of the following acts:

a) Employee Provident Fund and Miscellaneous Provision Act, 1952

b) The Coal Mines Provident Fund and Miscellaneous Provision Act, 1948
c) The Seamen’s Provident Fund Act, 1966
d) The Assam Tea Plantation Provident Fund and Pension Fund Scheme Act, 1955
e) The Jammu & Kashmir Employee Provident Fund Act, 1961

The subscriber’s contribution to NPS should add up to a minimum Rs.1000 per annum and
maximum Rs.12000 per annum, for both Tier I and Tier II taken together.

The matching contribution from GoI will be provided only if the subscriber makes the minimum
contribution of Rs.1000 per annum to his Tier I account. This matching contribution is capped at
Rs.1000. A subscriber may exit from the NPS-S at 60 years of age provided that a minimum of
40% of the pension savings is annuitized. A subscriber has the option to exit before 60 years of
age provided that a minimum of 80% of the pension savings is annuitized. A premature exit is
also subject to the overriding condition that the amount of pension savings to be annuitized
should be sufficient to yield a minimum amount of Rs.1000 per month.

The NPS product is a significant step forward from the defined-benefit schemes of the past, such
as the National Old Age Pension Scheme and has grown rapidly since inception. As of June
2014, the scheme services 28.16 lakh subscribers. In particular, the NPS-S is very significant in
the social security landscape for India on account of some of its design and delivery architecture
features:–

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 i. Sound Architecture: The NPS, in a similar vein to other social security schemes like the
Rashtriya Swasthya Bima Yojana (RSBY), is based on a public-private partnership
model, where government regulates, subsidises, and incentivises various stakeholders.
However, the private sector is leveraged for distribution and fund management. The NPS
architecture is considered in line with international best practices in defined- contribution
plan set-up.
ii. Voluntary Contributions: The nature of the plan, which is a defined-contribution scheme
that allows for voluntary contributions that are portable, is ideally suited to India’s
diverse unorganised sector, which is characterised by highly disparate income streams
across people, places, and time. Additionally, portability in the design of the scheme is
vital in view of the extent of expected rural-urban migration over the next few decades,
with over 200 million people moving from villages to cities between 2011 and 2030.
iii. Swavalamban Matching Contribution: The Government’s commitment to co-contribute
to unorganised sector pensions, and in essence bring them in parity with formal sector
workers, is a laudable and highly attractive feature of the scheme. It has previously been
noted that this matching contribution is a source of tremendous credibility for the scheme
and will be essential for incentivising subscriber take-up as the scheme ramps up to cover
a significant portion of the informal sector workforce. As of now, the Government of
India is committed to the Swavalamban contribution until 2016-17.
iv. Low Fund Management Fees: Fund Management fees are determined through a
competitive bidding process by prospective fund managers, and are around 0.01% per
annum. This is very low compared to fees charged by most mutual funds, which can be as
high as 1.75% per year.
v. Aggregator Model with Capital: The scheme works through distribution agents called
Aggregators who are required to hold capital both against operations risk and customer
protection risk. This bedrock of well-capitalised Aggregators forms the fundamental
building block for a robust delivery mechanism that offers depth and ease of access to the
subscribers.
vi. Contribution for the Long Term: In its current design, the NPS-S is a product that does
not offer the subscriber much liquidity until the time of retirement. This is a

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 quintessential feature of the product and has been done in order to enable the building up
of a sufficient corpus for life post-retirement.

2.2 METHODOLOGY

As the NPS-S enters its fifth year of implementation, this report provides a comprehensive
evaluation of the scheme, assessing its performance and impact based on secondary data
collected by National Securities Depository Limited (NSDL, the Central Recordkeeping Agency
or CRA for the scheme), data on income and expenditure of households serviced by a Rural
Financial services Institution (RFI) and a primary survey of Aggregators deploying the scheme
on the ground.

2.2.1 Analysis of secondary data:

 We analyse secondary data at the following levels:

 Subscriber data linked to unique Permanent Retirement Account Number (PRAN)
 Aggregator data linked to unique NPS-Lite Oversight Office (NL-OO) code
 Sub-aggregator data linked to unique NPS-Lite Account Office (NL-AO) code
 Collection centre data linked to unique NPS-Lite Collection Centre (NL-CC) code

The analysis covers four years of scheme data, corresponding to data collected between June
2010 and May 2014. For the purpose of this report, we have defined a year as starting from June
and ending in May. This allows us to capture the transactions recorded in the “extended months”
of the fiscal year- April and May- that the PFRDA usually deems as the “grace period” for
accounting for contributions into the NPS-S scheme for a given fiscal year. We have analysed,
overall, data pertaining to 28.37 lakh subscribers, 56 Aggregators, 338 Sub-aggregators and
16,028 collection centres.

2.2.2 Survey of Aggregators:

A select group of 19 Aggregators out of the 56 active Aggregators (an additional 16 Aggregators
were not yet active at the time of this analysis) were chosen and a telephonic, qualitative, semi-
structured survey was conducted with each of them. These Aggregators were chosen in such a

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way as to provide representation across the following parameters: (i) business model, (ii)
geographical region, (iii) performance, as measured by subscriber contribution and persistence,
and (iv) size of subscriber base. The final set of 19 Aggregators provided us with a reasonably
representative sample across all these parameters and covered almost 83% of the overall
subscriber base.

Business Model Total Surveyed Regional Spread of % of subscribers

Count Aggregator covered by
Aggregators
surveyed
Microfinance North, South, East,
Institution (MFI) 13 5 West, Central North- 33.8%
East
Distribution North, South, East,
Company 14 5 West, Central North- 29.1%
East
Government Body 13.3%
6 3 Central, South, West
Bank North, South, East,
19 4 West, Central North- 5.3%
East
Federation / Union 1.2%
2 2 East, South
Private Body 2 0 Central 0%

Total 56 19 82.7%

Table 1: Summary of surveyed Aggregators

The overall survey was focussed on three important questions from the point of view of the
Aggregators regarding the NPS-S scheme. The questionnaire administered on the Aggregators
was centred on the following themes:

i. The specific strategy for targeting subscribers and following up with them is a significant
driver of performance. What is the Aggregator’s current strategy for targeting new
subscribers and following up with existing subscribers, and how has this evolved over
time?
ii. There is currently a matching contribution of Rs.1000 to incentivise subscribers to
contribute at least Rs.1000 each year, what is the Aggregator’s view of the importance of
this contribution:

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 a) Should it continue as is, and why?
b) Should it not continue in its current form, but used in some other way such as marketing
or awareness creation, and why?
c) Should it be a combination of (a) and (b) – what would be the precise design?

iii. The current incentive structure has a one-time fee for each new NPS-S subscriber and
Rs.100 for each subscriber who makes an annual contribution of Rs.1000 or more:

a) Is this a good incentive design going forward, and why?

b) What changes would the Aggregator propose to this structure, and why?

The administration of this survey was designed to ensure that data analytics from the secondary
data on each Aggregator was used to guide each conversation, in order to ensure a deeper
probing of Aggregator performance, and also a more granular discussion on scheme design and
incentives. As a consequence, telephonic surveys with each of the Aggregators lasted, on an
average, 45 minutes. The insights from the surveys are presented throughout the report

2.2.3 Analysis of household financial data:

For the purpose of this report, we accessed household level data from a Rural Financial services
Institution (RFI) that provides financial products and services to remote rural households in
India. This institution currently services approximately 2.25 lakh households in 3 different states
of India (Tamil Nadu, Uttarakhand and Odisha) through its 201 branches. The financial services
institution captures extensive details of the households it enrols, and these details provide in-
depth insights of household level characteristics which we have used in this report. A brief
description of the details captured by the institution that are used in this report is provided below
in Table 2.

Household Details For each family member (including enrolee):

- Name, relationship to enrolled member, age, education
Family Income Income details for each family member, with provision for
incomesto be recorded from multiple sources per member:
Income-generating activities the member is involved in, net
incomefrom the activity, frequency of income, duration of income
(Eg: Rs.1000 every month for 5 months in a year)

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 Family Expenditure amounts and frequency for:
Expenditure - Clothing, education, fees, electricity, festival, food, health,
house rent, insurance, shop rent
Table 2: Nature of Data from Financial Institution

We use this data for the calculation of post-retirement corpuses required by individuals.

While it would have been ideal to supplement the secondary data analysis, Aggregator surveys,
and household financial data analysis with subscriber interviews and surveys, the stringent
timelines for report submission meant that this was not feasible. The PFRDA could look to
supplement this report with subscriber surveys at a later date.

2.3 CURRENT STATUS

i. The scheme has demonstrated high rates of growth, both in terms of subscriber’s
registered and total contributions since its inception: The number of subscribers
enrolled in the scheme has increased from 5.29 lakh in year one of the scheme to 28.37
lakh in year four (Figure 2) The Compounded Annual Growth Rate (CAGR) in
subscriber enrolment over the last four years has been 52.16%. Subscriber contributions
have also seen high rates of growth in the last four years; from Rs.24.6 crore in 2010 to
161.4 crore in 2013 (Figure 2). This represents a CAGR of 60.09%.

Figure 2: Subscribers enrolled and total contributions per year (2010-2013)

ii. The scheme has reached out extensively to women, who have traditionally been
excluded from participation in the financial system: The NPS-S scheme has had
considerable success in extending the benefits of co-contribution pension to subscribers
who are traditionally excluded from the ambit of the formal financial system. For

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 instance, as Figure 3 shows an overwhelming majority of the subscribers (70%) in the
scheme are women. As a counterfactual estimate, women hold only 30% of the total
individual deposit accounts (including current, savings and term deposits) in the country

Figure 3: Total subscribers by gender of subscriber

iii. The scheme has reached out substantially to unbanked populations, enabling them
exposure to diversified financial assets, and away from physical assets: The scheme has also
reached out to subscribers without access to bank accounts and therefore, the formal financial
system. As Figure 4 shows, approximately 84% of the extant subscriber base do not hold a bank
account. The scheme has shown considerable foresight through its decision to enrol subscribers
without bank accounts, thereby providing a large numbers of subscribers the benefits of access to
equity and debt markets. This ensures that, unlike a majority of their other assets, the retirement
savings of subscribers are insulated from the fluctuations of the local economy and are
uncorrelated with their existing asset portfolio.

Figure 4: Percentage of subscribers with bank accounts

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CHAPTER 3
ELIGIBILTY CRITERIA FOR NPS-LITE & ENROLLMENT PROCESS

3.1 WHO IS ELIGIBLE FOR THE NATIONAL PENSION SCHEME NPS- LITE?

Fresh registration under Swavalamban Scheme has been discontinued w.e.f April 1, 2015. The
subscribers of Swavalamban/ NPS Lite who are in the age group of 18-40 years have been given
option to migrate to new Atal Pension Yojana (APY) launched by the Govt. of India in May
2015 which provide minimum guaranteed pension and is focused towards the poor and the
under-privileged citizen of India. NPS Lite/ Swavalamban subscribers who are above 40 years of
age and thus cannot migrate to APY can continue in the Swavalamban scheme till they attain the
age of 60 years. If they wish, they can also exit from the scheme.
NPS Lite Scheme is aimed to secure the financial future of people in low-income groups.
Following is the eligibility criteria for the scheme:
 All citizens of India between the ages of 18 years to 60 years.
 The subscriber has to be from an unorganized sector. A person belongs to the
unorganized sector if they are not employed by the Central or state government or any
other autonomous body and is not covered under any social security scheme.
 The scheme applies to all people in the unorganized sector. And the benefit of central
government contribution (INR 1,000) is available only to individuals who have their NPS
contribution in the range of INR 1,000-INR 12,000 for both Tier I and Tier II accounts
together. The subscriber also has to contribute a minimum of INR 1,000 per annum to the
Tier I account. And the central government will contribute a minimum of INR 1,000 in
Tier I and Tier II accounts combined per annum.

3.2 ENROLLMENT
 Eligible* individuals in the age group of 18-60 years, willing to open an NPS-
Swavalamban account may fill a NPS-Swavalamban form. (Link for Form)
 Acceptable Documents for KYC
 Initial minimum contribution amount to be deposited at the time of registration is
Rs.100/- only.
 Submit your filled form along with the relevant documents to an Aggregator.

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  To search your nearest Aggregator
Or
 Individual may also call to Toll free call center number 1800-110-708 or SMS “NPS” to
56677

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CHAPTER 4
BENEFITS & DRWABACKS OF NPS-LITE

4.1 BENEFITS OF NPS-LITE

Following are the benefits of the scheme:

 The scheme is open to all citizens of India in the unorganized sector in the age group of
18-60 years.
 Opening an NPS Lite account is easy and simple with the help of an Aggregator.
 Investment in the NPS Lite scheme is considered as safe as the Pension Fund Regulatory
and Development Authority PFRDA regulates it. Also, NPS Trust regularly monitors and
tracks the funds’ performance.
 Investing in NPS Lite is very economical. The scheme is based on a low-cost structure
and has no restrictions on the minimum contribution.

4.2 DRAWBACKS OF NPS-LITE

 Taxability: The contributions get tax benefit under Section 80C. However, at the time of
withdrawal, the lump sum would be taxable as per the individual’s tax slab. It is a case of
EET (exempt on contributions made, exempt on accumulation, taxed on maturity) unlike
EPF, PPF which are EEE (exempt, exempt, exempt).
 Comparison to mutual funds: Since the NPS is meant for retirement and financial
security, it does not permit flexible withdrawals as are possible in the case of mutual
funds.
 Returns: If an individual is voluntarily investing in NPS, then he/ might as well invest in
the stocks or mutual funds (MF). It is the tax benefits that would make NPS an edge
above other pension products.

Atal Pension Yojna was announced in Budget 2015-16 as an upgrade to the Swavalamban
scheme, which will now fold into the new defined benefit pension scheme for the poor. Atal
Pension Yojana (APY), will replace the previous government’s Swavalamban Yojana NPS Lite,
which did not find much acceptance among people.

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The pension fund regulator will administer the scheme, which is open to all unorganized sector
workers who currently do not avail of any social security scheme and have a bank account.
This scheme is introduced to give clarity of future benefits to the subscribers––something that
was missing in the Swavalamban scheme, says a government note.

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CHAPTER 5
WITHDRAWAL FROM NPS – LITE

A subscriber can exit normally at the age of 60 from the NPS Swavalamban scheme. However,
the scheme also allows early exit in certain conditions. Following are the withdrawal rules for the
scheme:

5.1 EXIT AT THE AGE OF 60

At the time of exit at the age of 60, the subscriber should use at least 40% of the corpus to
purchase an annuity scheme. The subscriber will provide a bank account and other withdrawal
details to the aggregator. The aggregator will upload the same in the Central Recordkeeping
Agency CRA system for execution. Also, at the time of exit, the aim is to offer a minimum of
INR 1,000 per annum as a pension. If 40% of the corpus doesn’t fulfil this requirement, then a
larger amount of the corpus is used to buy the annuity scheme.

5.2 EXIT BEFORE THE AGE OF 60

The subscriber has to use a minimum of 80% of the amount for purchasing an annuity. The rest
20% can be withdrawn.

5.3 WITHDRAWAL DUE TO DEATH OF THE SUBSCRIBER

In the event of the subscriber’s unfortunate demise, the legal heirs or the nominee will approach
the aggregator with necessary documents like the death certificate and ID proof. The aggregator
will then facilitate the transfer of the entire corpus to the nominee or legal heir’s account.

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CHAPTER 6
RECOMMENDATION

Overall, this study should provide recommendations on the following aspects of the NPS-Lite
scheme:

 Improving the adequacy of public pension under NPS-S

 Impact of the Swavalamban matching contribution and its continuation
 Design of Aggregator incentives
 Strategies for improving take-up of NPS-S
 Improving persistence rates of existing subscribers

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CHAPTER 7
CONCLUSION

The NPS-Lite is a great asset for the retired employees as the government wants to create a
pensioned society in India. This helps them to enjoy certain perks after their retirement. The
CRA is responsible for managing the database of every pensioned individual in the country. The
pension is collected from the monthly salaries of individuals while they still work and then the
funds are delivered are pension to them after their retirement. The scheme has also included
various other benefits such as health schemes also in this system. The NPS Swavalamban
scheme has a lot of benefits for the people and if the person is careful of the requirements and
criterion of this whole system then he/she can highly benefit from it.

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CHAPTER 8
REFERENCES

 https://www.npscra.nsdl.co.in/scheme-information.php
 https://static.vikaspedia.in/media/files_en/social-welfare/unorganised-sector-1/faq-
swavalamban.pdf
 https://vikaspedia.in/social-welfare/unorganised-sector-1/schemes-unorganised-
sector/nps-swavalamban
 https://scripbox.com/saving-schemes/nps-lite/
 http://swapsushias.blogspot.com/2016/01/p-for-pension-nps-swavalamban-
atal.html#.Yjbh6OpBzIU
 https://www.moneylife.in/article/swavalamban-initiative-to-accelerate-nps-yet-to-pick-
up/5235.html

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