National Pension System

Agenda

• Need for retirement planning

• About National Pension System
• Features and benefits
• Account opening process
• Benefits of SA to NPS
• About ICICI Bank POP & ICICI Prudential PFM
Need for Retirement Planning
Improvements in life expectancy leading to average
Urbanization and nuclearization of families in India post retirement period of 18 years (2019)

20.3
17.7

14.7

1980-85 2010-15 2050-55

Vanishing Traditional Support System Life expectancy for Indians aged 60 years

Better health care at an expense Inflation

Medical expenses set to rise at 10% p.a.

72,762
Monthly
expense 35,000

Age 45 60
1Based on 5% inflation rate
Retirement Planning in India
Low mindshare to plan and invest in Pension

% of household wealth held Household financial savings

4% Deposits
6%
11%
7% Insurance funds
13%
5% 44%
Provident and
77% pension funds
14% Currency

Shares and
Gold Durable goods 19% debentures
Financial assets Real estate Claims on
government

Only 5% held in financial assets out of which 14% is in provident and pension funds
Source: RBI report – Indian Household Finance 2017
Crisil report – Financial security for India’s elderly 2017
Customer needs during retirement

Guaranteed Returns on Maintaining current lifestyle

investment

Providing for spouse/partner if I die first

Value of
Creating legacy for future 2 generations (children
savings/investments should and grand children)
keep up with inflation

Healthcare costs covered beyond medical

insurance

Liquidity
Travel

Source: Society of actuaries – Spotlight on retirement India - 2018

About NPS
Voluntary defined
contribution scheme that is
introduced by Government of
India
The contributions grow and
accumulate over the years
depending on the returns over
the investment made
NPS is considered as one of the safest ,tax-saving instrument for retirement planning
Objective of NPS is to ensure
financial security post retirement
Subscribers enjoy reasonable
market linked returns under
NPS over long run
Accumulation of corpus
during work-life to meet their
post retirement needs
Two types of accounts are
made available –
Tier 1 and Tier 2
NPS - Features & Benefits
Market Linked Retirement Plan with multiple Benefits

Tax benefits Economical Flexible Portable Regulated

Multiple tax Low cost Choice of fund Account Regulated by

benefits u/s investment manager, portability across PFRDA and ICICI
80CC(1), product available investment employers and Bank is registered
80CCD(1B) & in the market options & annuity location as Point of
80CCD(2) options Presence (PoP)

• Subscriber creates substantial retirement corpus

• Tax free withdrawal up to 60% and remaining 40% for annuity purchase
• Entry age 18-70 year & stay invested up to 75 years age
NPS Account Options

• Mandatory | Tax benefits applicable

• Controlled withdrawal
Tier 1 • Min. contribution of ₹ 500 at the time of
account opening (Retail)
• Min. contribution of ₹1000 in a financial year

• Voluntary | No tax benefits

Tier 2 • Free withdrawals/contributions anytime
• Min. contribution of ₹1000 during NPS account opening
• ₹ 250 is the min. amount per contribution

• Tier 1 Account is mandatory for opening a Tier 2 NPS account

• Low fund management charges make NPS Tier 2 an attractive investment option
Tax Benefits

NPS Individual (All citizen) Model NPS Corporate Model

NPS contribution made

Individuals can avail tax
Individuals can avail by employer, up to 10%
deduction by
additional deduction of of Salary (Basic+ DA) is
contributing up to ₹
up to ₹ 50,000 deductible from gross
1,50,000 u/s 80C
taxable salary
u/s 80CCD (1) u/s 80CCD (1B) u/s 80CCD (2)

• Above tax benefits for subscribers are applicable only under Tier 1
• For the employees to avail the Corporate tax benefit, the Corporate must be empaneled with a POP
(ICICI Bank)

9
 Tax Benefit : Old vs New Tax Regime

Old Tax Regime New Tax Regime

10
Tax saving illustration

Example where the Subscriber’s basic salary is ₹ 600,000 & is doing both corporate & individual NPS

Income Head Without NPS With NPS

Provident Fund 72,000 72,000

PPF 50,000 50,000 Covered u/s 80C – Tax

deduction upto ₹1,50,000

Life insurance/ELSS/Tax Saving FD/NSC 28,000 28,000

Individual NPS contribution U/s Individual Contribution to NPS
50,000
80CCD(1B)
Employer contribution to NPS
Corporate NPS contribution U/s 80 CCD(2) 60,000 up to 10% of the basic salary

Taxable income reduced by

Deduction from Gross taxable income 150,000 2,60,000 additional ₹1,10,000 from Gross
taxable income

For a person with a basic salary of ₹ 600,000, there is an additional tax savings of
₹ 34,320 a year by investing in NPS individually as well as through your company
11
Union Budget 2020 – impact on NPS

Clarification on National Pension System (NPS) with reference to the changes announced in the
Union Budget, 2020

The total tax benefit under employer’s contribution towards EPF, NPS and Superannuation fund
(SAF) is proposed to be capped at ₹ 7.5 lacs for tax exemption. The employee can opt for higher
contribution amount, however, amount exceeding ₹ 7.5 lacs and subsequent growth / interest
earned will be made taxable in the hands of the employee.

This is in effect from 01.04.2020.

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Power of Compounding

Accumulat Tax
ed NPS Savings
Corpus ₹ 10.5 lakhs
₹ 1.6 Crores

Accumulat
ed NPS Tax
Savings
Corpus
₹ 6.8 lakhs
₹ 84.6 lakhs

Start saving as early as possible to ensure that you a sufficient corpus

LOW HIGH

*New fund Scheme A – Infrastructure Trust Bonds & Real Estate. 13

NPS Investment Choices

Savings
Automated options
Complete control of
Active Choice Auto Choice for ease and
investments
convenience
Asset Class E High Risk/High Return
High Risk/High Return LC 75
(Equity)

Asset Class C Mod. Risk/Mod. Return

Mod. Risk/Mod. Return LC 50
(Corporate Bonds)

Asset Class G Low Risk/Low Return

Low Risk/Low Return LC 25
(Government Bonds)

Very High Risk/ Asset Class A

Based on life cycle chosen, money invested in
Very High Return (Alternate Assets)
Equity, corporate bonds & Govt. securities
Scheme choices may be changed 4 times a year:
✓ ‘Active’ to ‘Auto’ option and vice versa
✓ Changes in Asset allocation
NPS exit options

Vesting criteria Benefits

Upon normal 1. Up to 60% of corpus can be withdrawn Tax-Free

superannuation 2. Minimum 40% to be invested in annuity for monthly pension
(60 year) 3. If corpus ≤ ₹ 5 Lacs, withdrawal of full amount is permitted

1. Permitted only after 5 years of participation

Exit from NPS before
2. Up to 20% of corpus can be withdrawn Tax-Free
the age of normal
3. Minimum 80% to be invested in annuity for monthly pension
superannuation
4. If corpus ≤ ₹ 2.5 Lacs, withdrawal of full amount is permitted

1. On death, 100% of pension wealth amount will be payable to

Upon death the nominee/ legal heir of the subscriber
2. The nominee can choose to take the annuity as well

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NPS exit illustrations
Case - 1 (Age - 60 yrs) Case - 2 (Age - 50 yrs)
NPS Exit on
Particulars Superanuuation NPS Premature Exit
Corpus Value 1,00,00,000 1,00,00,000
Maximum Lumpsum Withdrawal % 60% 20%
Maximum Lumpsum Withdrawal Amount 60,00,000 20,00,000
Minimum Annuity Purchase Price 40% 80%
Minimum Annuity Purchase Price (A) 40,00,000 80,00,000
Annuity Rate of JL,LS ROP*** (B) 6.8%* 6.7%*
Yearly Pension Amount (AxB) 2,72,000 5,36,000
Monthly Pension 22,667 44,667

***Joint Life, Last Survivor with Return of Purchase Price: The annuity/pension is first paid to the
annuitant/pensioner. After the death of the annuitant/pensioner, the spouse receives a pension which is an
amount that is equal to the annuity paid to the annuitant/pensioner. After death of the last survivor, the
purchase price with which annuity was bought, is returned to the nominee.
*Annuity rates are subject to market change depending on internal and external circumstances
Systematic Lumpsum Withdrawal (SLW)

On exit, retirement age, lumpsum corpus can be withdrawn in a phased

Systematic Lumpsum manner. Subscriber has an option to withdraw desired amount
Withdrawal systematically at regular periodic intervals. This is similar to Systematic
Withdrawal Plan under Mutual Funds.

1. Can be opted at the time of Superannuation (Retirement) Exit

Features 2. Applicable only on Lumpsum NPS corpus
3. Option of Monthly, Quarterly, Half yearly and Yearly frequency
1. Generates regular cash flows
2. Along with Annuity, the regular cash flows through SLW will lead to
increase in the monthly income of the Subscriber.
Benefits
3. Tool for Wealth creation. Returns shall continue to accumulate on the
remainder Corpus.
4. Tax Benefits can be availed on all SLW Withdrawals

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Partial Withdrawal in NPS

Immediate financial
requirement
Education & Marriage of Construction or purchase of
• You can avail this children a residential property
facility 3 times post
completion of 3 years
• Max withdrawal of
25% contribution
Critical illness diagnosis
• Employer’s contribution
and its interest
e.g. disease of heart, kidney, Start of a new business
component cannot be liver, cancer etc.
withdrawn
How to choose NPS account
ICICI Bank Customer
❖ Select “NPS” from
Investment and Insurance
Tab
❖ Step 2: Under “Corporate
Subscriber Model” select
Co. name from dropdown,
enter personal details,
nominee details, select
Asset Allocation
❖ Step 3: Upload Photo and
Signature and click on
Submit
❖ Step 4: Complete OTP
verification, OTP received
on registered mobile and
email ID
❖ Step 5: Instant PRAN
generated on successful
doc upload and verification
Non ICICI Bank
Customer
❖ Step 1: Login to the below
MyNPS website>
NPS>Registration(New)
❖ Step 1: Select “PPF/NPS/Gold
Bond” from Invest and Insure ❖ Step 2: Fill online form &
Tab upload docs (Pan,
Cancelled cheque, photo,
❖ Step 2: Click on “Instant NPS” - signature image
> “Lets Get Started”
❖ Step 3: Enter contribution
❖ Step 3: Under “Corporate amount & confirm
Subscriber Model” select Co. payment
name from dropdown, enter
personal details, nominee ❖ Step 4: Complete e-Sign
details, select Asset Allocation & PRAN will be
generated. This PRAN
❖ Step 4: Upload Photo and gets activated once Bank
Signature and click on Submit KYC is successful
❖ Step 5: Complete OTP
verification, OTP received on
registered mobile and email ID
❖ Step 6: Instant PRAN MYNPS NSDL
generated on successful doc
upload and verification
https://mynps.nsdl.com/myNPS/NationalPensionSystem.html?app
Type=main&authId=TjRVUmNwRkU4V3RlYUx5aVJDSU5FQT09 19
ICICI PFM - Returns
NPS investment to be looked at a long term perspective; in short term volatility will be
there as per market conditions

1 year 3 year 5 year 10 year

Scheme Type
returns returns returns returns

ICICI Prudential Scheme E (Equity) 14.46% 18.70% 15.10% 13.95%

ICICI Prudential Scheme C (Corporate Bonds) 7.12% 5.22% 8.16% 9.12%

ICICI Prudential Scheme G (G-securities) 6.54% 4.14% 7.88% 9.15%

Consistent Top Fund Manager

As on 1st Dec 2023 Source: www.npstrust.org
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Benefits of NPS vs Superannuation

Particulars NPS Superannuation

Maximum 60% of the corpus can be 33.33% of the corpus can be

Withdrawal withdrawn as lump sum tax-free withdrawn as lump sum
Flexibility of pension fund, investment
choice, contribution amount, withdrawal Flexibility basis pension scheme rules
Flexibility
amount etc.
Applicable on investment of up to 10% of Applicable on investment of up to 15% of
Tax Benefits on Salary (Basic + DA)*
Salary (Basic + DA)* and 1.5 L + 50K
investment
additional on individual contribution
Can continue contributing up to 75 years
Members can contribute up to
Scheme and have the option for deferred
retirement age and cannot defer
continuity period withdrawal, deferred annuity and phased
annuity payout/commutation etc.
withdrawal

* Tax exemption capping of ₹ 7.5 lacs for employer’s contribution towards EPF, NPS and Superannuation fund
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Benefits of NPS vs Superannuation
Particulars
GST on Annuity Purchase
Choice of Annuity Service
Provider
Exit rule before attainment
of retirement age
Tax treatment on exit before
attaining retirement age
Scheme Management
Subscriber can manage & maintain a single plan with larger investment and the lowest
NPS
Annuity purchase price is
exempt from GST
Multiple ASP’s ( 13 ASP’s)
Up to 20% of corpus is permitted
after 5 years of account opening.
Complete withdrawal is possible
if corpus is ≤ ₹ 2.5 lacs
Can withdraw up to 20% of your
corpus and invest balance into
annuity to start pension
Much simpler, once the
corporate has registered for
NPS, employees contributions
to be provided on regular basis
fund management charges
Superannuation
Annuity purchase price is subject
to GST of 1.8%
Limited as per Trust Deed Policy
Exit allowed as per Trust Deed
policy
Not Possible
Trust management including filing
of returns with CBDT, separate
account to be maintained
alongwith taking care of all
operational aspects
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Illustration for staying invested post-retirement

Particulars Scenario 1 Scenario 2 Scenario 3

Superannuation Balance 50,00,000 50,00,000 50,00,000
Retirement Age (yrs) 60 60 60
Target Pension Age under NPS(yrs) 75 75 70
NPS Investment Growth Rate 10% 12% 12%

Accumulation at target age 2,08,86,241 2,73,67,829 1,55,29,241

NPV (discounted at 7.5%) 70,58,840 92,49,396 75,34,693
Increase in benefit 105% 169% 119%

*only for illustration purpose 23

End-to-end NPS solution
Managing end-to-end customer journey with ease of on-boarding, servicing and annuitizing
retirement corpus

Onboard Service Annuitize

ICICI Bank services customer

ICICI Bank on boards requests as a POP
Customer exits NPS and buys
customer for NPS as a POP Pension for his/her lifelong
(Point of Presence) income
ICICI Pru PFM / Other PFM
manages customer’s NPS funds

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Thank you
Active Choice Active choice
Age Cap On E Cap On C Cap On G Cap On A
Up to 50 75% 100% 100% 5%
51 72.5% 100% 100% 5%
52 70.0% 100% 100% 5%
53 67.5% 100% 100% 5%
54 65.0% 100% 100% 5%
55 62.5% 100% 100% 5%
56 60.0% 100% 100% 5%
57 57.5% 100% 100% 5%
58 55.0% 100% 100% 5%
59 52.5% 100% 100% 5%
60 & above 50.0% 100% 100% 5%

• In case the equity allocation increases due to the increase of the subscribers age, then by default excess portion of equity will move to Govt. Securities by
default
• If the subscriber is of age less than 50 and chooses less than 75 % in equity, then the tapering will be age/percentage of the equity cap as per the table above.
• However, in both the scenarios the subscriber has the option to manually change the allocation by login in CRA system
Auto Choice
Aggressive (LC 75) Moderate (LC 50) Conservative (LC 25)
Age Corporate Govt. Corporate Govt. Corporate Govt.
Equity Equity Equity
Bonds Securities Bonds Securities Bonds Securities
< = 35 Yrs 75% 10% 15% 50% 30% 20% 25% 45% 30%
36 71% 11% 18% 48% 29% 23% 24% 43% 33%
37 67% 12% 21% 46% 28% 26% 23% 41% 36%
38 63% 13% 24% 44% 27% 29% 22% 39% 39%
39 59% 14% 27% 42% 26% 32% 21% 37% 42%
40 55% 15% 30% 40% 25% 35% 20% 35% 45%
41 51% 16% 33% 38% 24% 38% 19% 33% 48%
42 47% 17% 36% 36% 23% 41% 18% 31% 51%
43 43% 18% 39% 34% 22% 44% 17% 29% 54%
44 39% 19% 42% 32% 21% 47% 16% 27% 57%
45 35% 20% 45% 30% 20% 50% 15% 25% 60%
46 32% 20% 48% 28% 19% 53% 14% 23% 63%
47 29% 20% 51% 26% 18% 56% 13% 21% 66%
48 26% 20% 54% 24% 17% 59% 12% 19% 69%
49 23% 20% 57% 22% 16% 62% 11% 17% 72%
50 20% 20% 60% 20% 15% 65% 10% 15% 75%
51 19% 18% 63% 18% 14% 68% 9% 13% 78%
52 18% 16% 66% 16% 13% 71% 8% 11% 81%
53 17% 14% 69% 14% 12% 74% 7% 9% 84%
54 16% 12% 72% 12% 11% 77% 6% 7% 87%
> = 55 Yrs 15% 10% 75% 10% 10% 80% 5% 5% 90%