National Pension System
Retirement is all about getting to do things you have always wanted to. It could be going on a holiday, pursuing a hobby/sport or just pampering your family with gifts.
This only means your financial needs will not reduce even as you may not earn a pension post retirement.
Even if you want to maintain the present standard of living, you have to start saving today for a comfortable tomorrow.
Retirement planning is all about a disciplined saving, dynamic investment strategy to build a sufficient retirement corpus and a convenient and systematic pay out in the post-retirement phase.
National Pension System fits all these requirements. Prior to the launch of NPS, pension plans by life insurance companies were one of the few products, which exclusively catered to the need for retirement planning.
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What is NPS?Retirement is all about getting to do things you have always wanted to. It could be going on a holiday, pursuing a hobby/sport or just pampering your family with gifts.
This only means your financial needs will not reduce even as you may not earn a pension post retirement.
Even if you want to maintain the present standard of living, you have to start saving today for a comfortable tomorrow.
Retirement planning is all about a disciplined saving, dynamic investment strategy to build a sufficient retirement corpus and a convenient and systematic pay out in the post-retirement phase.
National Pension System fits all these requirements. Prior to the launch of NPS, pension plans by life insurance companies were one of the few products, which exclusively catered to the need for retirement planning.
| Benefits of NPS |
Features of NPS |
- It is a low cost investment product. Hence the cost-adjusted returns of the NPS can be quite attractive in the long run.
- You can start saving as low as Rs 500 per month or Rs 6000 per year.
- You have the flexibility to operate your account from anywhere within the country.
- You can choose your own Pension Fund Manager to manage your corpus.
- You can earn market-linked returns if you opt for equity investment
- You can avail tax exemption under Section 80 C on your contribution to NPS.
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- Any Indian citizen between 18yrs and upto 60 yrs can invest in NPS.
- Minimum limit of 6,000 per year (Rs.500 per month).
- No upper limit of Investment
- Annual Fees of 0.25% on contribution amount for Managing the fund.
- Safe and reasonable market based returns over the long term
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Getting Started
You can open a NPS account with Point of Presence (POP) (i.e. HDFC securities) and get a PRAN, which is generated at NSDL- the central record keeping agency (CRA).
Once your account is opened, you will be allotted a unique “Permanent Retirement Account Number (PRAN)”, which will remain the same for the rest of your life.
The client will be able to use this account and this unique PRAN from any location in
India.
There are two types of sub accounts available for individual investors:
Tier 1: This account does not allow pre-mature withdrawal and it offers tax benefit to your contribution to NPS under Section 80 C
Tier 2*: This is an add-on account, which allows premature withdrawal. However, any contribution to Tier 2 account does not qualify for tax benefit.
*Currently HDFC securities is only offering Tier I option.Choice of Pension Fund Manager (PFM)
You can choose any one of the following five entities to manage your pension fund :-
- ICICI Prudential Pension Funds Management Company Limited
- Kotak Mahindra Pension Fund Limited
- Reliance Capital Pension Fund Limited
- SBI Pension Funds Private Limited
- UTI Retirement Solutions Limited
Investment Options:-
You can choose any one of the following investment options in NPS.
- Active Choice –You decide the percentage of allocation of your NPS wealth among three investment options such as Equity (E), Corporate Bonds (C and Government Securities (G). You can choose your own asset allocation strategy. However, exposure of NPS to equity is capped at 50%.
- Auto Choice – If you are not comfortable to deciding your asset allocation strategy then you can consider Auto Choice. Under this option, your NPS contribution will be invested in a pre-determined asset allocation strategy based on your age. At every stage, there is an automatic re-jigging of asset allocation, which is a unique feature of NPS. This option will follow higher-risk, higher-return strategy in your early years and as you investor approach retirement, the NPS money is moved to a more low risk investments.
To apply through HDFC securities, one needs to be a registered customer of HDFC securities.How to Subscriber for NPS?
1) Active Choice –You decide the percentage of allocation of your NPS wealth among three investment options such as Equity (E), Corporate Bonds (C and Government Securities (G). You can choose your own asset allocation strategy. However, exposure of NPS to equity is capped at 50%.