GROUP PRESENTATION

GROUP 4 :
Arnnava Sharma | Ayesha Dutta | Kunal Aggarwal | Kurja Rathore | Sumedha Arya
What is the The National Pension System (NPS) is a voluntary
defined contribution pension system administered
and regulated by the Pension Fund Regulatory and
National Pension Development Authority (PFRDA), created by an
Act of the Parliament of India. The NPS started
System? with the decision of the Government of India to
stop defined benefit pensions for all its employees
who joined after 1 January 2004. While the scheme
NPS subscribers in CRA system around 96 was initially designed for government employees
lakhs only, it was opened up for all citizens of India in
Started with Government employees 2009. NPS is an attempt by the government to
create a pensioned society in India. Today, the NPS
Initiative to provide is readily available and tax efficient under Section
old-age income security 80CCC and Section 80CCD. Under the NPS, an
individual can contribute to his retirement account.
Made available for all citizens Also, his employer can contribute to the welfare
of India from May 2009 and social security of the individual.
 Structure of NPS
Unlike traditional financial products where all the functions
(sales, operations, service, fund management, depository) are
done by one company, NPS follows an unbundled architecture
where each step of the value chain has been made disjointed
from the other.
01
NPS architecture consists of the NPS Trust, which is entrusted
with safeguarding subscribers' interests, two privately owned
Central Recordkeeping Agencies (CRAs), which maintain the
data and records, Point of Presence (POP) as collection,

At present, central government employees have no say in the

02
matter of choice of fund manager or investment allocation in
NPS, as both are decided by the government. All the NPS
contributions of Central government employees are being
distributed evenly across three public sector fund managers
:LIC Pension Fund, SBI Pension Fund and UTI Retirement
Solutions. All the major commercial banks, brokers and stock
03
holding corporations perform the role of PoP. The subscriber
can choose any one of them.
distribution and servicing arms, pension fund managers
(PFM) for managing the investments of subscribers, a
custodian to take care of the assets purchased by the fund
managers, and a trustee bank to manage the banking
operations.
Premature withdrawal in NPS before age 60 required parking
80% of the sum in an annuity. One can withdraw 20 percent
of the corpus before 60 years but he/she must buy annuity

04 with 80 percent of the corpus. One can withdraw the complete

amount if the pension collected is less than INR 2,00,000
 Features of NPS

Open for all Indian citizens between the ages of 18-60 years. Your investment in the NPS Tier I account is locked-in until the
age of 60. Before the age of 60, you can make partial withdrawals for specific purposes or you can go in for a premature exit

Permanent Retirement Account Number, which is the unique and portable number provided to each subscriber under
NPS and remains with him throughout. A copy of the card is required for Tier II activation and also for subsequent
contribution in Tier II account

The tax benefits offered in NPS can be claimed only for the investments made in the Tier I account. You can
open the NPS Tier II account only when you already have a Tier I account. Tier II account is a voluntary account
with flexible withdrawal and exit rules. 

Contribution to Tier II NPS has no tax benefits – you can’t claim deductions and on exit, the corpus is taxed. Unlike
the Tier I account, there is no lock-in with savings in the Tier II account. You can withdraw from the Tier II account at
any time.

Under section 80C upto Rs. 1.5 lakhs, Rs. 50,000 under section 80CCD (1B) and 10% of salary+DA can be claimed under
tax deductions
 Bas ic Salary ₹ 6 lakh
Assume you DA ₹ 3 lakh
earn 9 lakhs Deductions under 80C ₹ 1.5 lakh
as basic salary Deductions under Section 80CCD (1B) ₹ 50,000
and 3 lakhs as Deductions under Section 80CCD (2) (10% of Salary+DA) ₹ 90,000
DA Total deduction that can be claimed ₹ 2.9 lakh
 About PFRDA
The Pension Fund Regulatory & Development Authority Act was passed on 19th September, 2013 and the same
was notified on 1st February, 2014. PFRDA is regulating NPS, subscribed by employees of Govt. of India, State
Governments and by employees of private institutions/organizations & unorganized sectors.

Designing of NPS architecture
NPS has un-bundled architecture
where different activities are
performed by different entities
(intermediaries)
Some of the examples can be:
• Sourcing of customers: It is
managed by financial institutions
registered with PFRDA
• Back office Operations:
managed by separate entity and
is known as Central
Recordkeeping Agency (CRA)
Functions of PFRDA
Appointment and monitoring Investment through NPS Trust
of entities
NPS offers below funds options for
• investment to its Employees:
Service level agreement with all
• Equity (E): A ‘high return – high risk’
entities
• fund that invests predominantly in
Investment guidelines for PFMs
• equity market instruments.
Performance monitoring of
• Corporate Debt (C): A ‘medium return
entities including PFMs
– medium risk’ fund that invests
predominantly in fixed income
bearing instruments
• Government Securities (G): A ‘low
return – low risk’ fund that invests
purely in fixed income bearing
instruments
Stakeholders in NPS
 CRA-Roles and
Responsibilities
CRA is the core infrastructure for the National Pension System and is critical for its successful
operationalization.

PFRDA has appointed NSDL and KARVY as Central Record Keeping Agency (CRA) for NPS.
Both venture in India carries out the functions of record keeping, administration and customer
Service for all subscribers under NPS.

• Issuance of PRAN Kit : Issuing of unique Permanent Retirement Account Number

(PRAN) to each subscriber, maintaining a database of all PRANs issued and recording
transactions relating to each subscriber's PRAN.
• Maintenance of the KYC Documents
• Provision to change Subscriber Details
• Issuance of Annual Statement
• Alerts to subscribers
• Central Grievance Management System
• Recordkeeping, Administration and customer service functions for all subscribers of the
NPS.
• Acting as an operational interface between PFRDA and other NPS intermediaries such as
Pension Funds, Annuity Service Providers, Trustee Bank etc.
 Investment Options Under
The Subscriber is required to decide his/her investment choice. It is can be an Active Choice or Auto Choice.
NPS
Active Choice: Individual Funds

In this type of investment choice, the 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 (Pension Fund

Manager), the Asset Class ( 4 types: Equity, Corporate
debt, Government Bonds and Alternative Investment
Funds) as well as percentage allocation to be done in
them in each scheme of the PFM.

It is to be noted:

• 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%.
 Investment Options Under
NPS
Auto Choice: Lifecycle Fund
NPS offers an easy option for those Subscribers who do not The exposure in Equity Investments starts with 75% till 35
have the required knowledge to manage their NPS years of age and gradually reduces as per the age of the
investments. In this option, the investments will be made in Subscriber.
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 LC50 - Moderate Life Cycle Fund: This Life cycle fund
Subscriber). provides a cap of 50% of the total assets for Equity
investment. The exposure in Equity Investments starts with
A Subscriber who wants to automatically reduce exposure 50% till 35 years of age and gradually reduces as per the
to more risky investment options as he / she gets older, Auto age of the Subscriber.
Choice is the best option. As age increases, the individual’s
exposure to Equity and Corporate Debt tends to decrease.
Depending upon the risk appetite of Subscriber, there are LC25 - Conservative Life Cycle Fund: This Life cycle
three different options available within ‘Auto Choice’ – fund provides a cap of 25% of the total assets for Equity
Aggressive, Moderate and Conservative. investment. The exposure in Equity Investments starts with
25% till 35 years of age and gradually reduces as per the
LC75 - Aggressive Life Cycle Fund: This Life cycle fund age of the Subscriber.
provides a cap of 75% of the total assets for Equity
investment.
Interim Withdrawal Exit Process
Withdrawal will be allowed subject to • Upon attainment of the age of
(Withdrawal option are limited to ensure
sufficient terminal corpus) 60 years

• Subscriber should be in NPS for 10 • At any time before attaining

years the age of 60 years
• Amount should not exceed 25% of
the contributions made by the • Death of the subscriber
subscriber

• Withdrawal can happen only against

specified reasons. 1 2
 Two Tier
Structure
Tier I is mandatory for Tier II

Pension Account Investment Account

• Mandatory • Not mandatory (OPTIONAL)
• Multiple Tax benefits • Anytime withdrawal
(without exit load)
• Tax benefits
Benefits
Simple Flexible
1 2

Transparent Portable
Cost Structure 3 4

Tax Savings Strong

5 Regulation 6
 Ease of access

Subscriber Access to bi- View Email statement

Master Report to lingual transactions to registered ID
ensure accuracy Interactive Voice statement & A/C using T-PIN
of records Response (IVR) details online
using T-PIN using I-PIN

Dedicated Corporate Logging of Instant reset of

website for complaints T-PIN & Online
dissemination of against the reset of I-PIN
information interfacing entity through OTP
 Power ofwise
Scheme BATNA
return

http://www.npstrust.org.in/return-of-n
ps-scheme

Historical Returns available on

website
Thank You!