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National pension Scheme Dilshad Billimoria CFP Dilzer Consultants
 

National pension Scheme Dilshad Billimoria CFP Dilzer Consultants

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The National Pension Scheme is a Defined Contribution Scheme that was set up in 2004 for all Government Employees and was open to the general public in May 2009. It is a social security benefit to ...

The National Pension Scheme is a Defined Contribution Scheme that was set up in 2004 for all Government Employees and was open to the general public in May 2009. It is a social security benefit to create a retirement corpus to meet post retirement income needs, initiated by the Government of India in association with the Pension Regulatory Development Authority.

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    National pension Scheme Dilshad Billimoria CFP Dilzer Consultants National pension Scheme Dilshad Billimoria CFP Dilzer Consultants Presentation Transcript

    • National Pension Scheme The National Pension System (NPS) [1] is a defined contribution based pension system launched by Government of India with effect from 1 January 2004. Like most other developing countries, India does not have a universal social security system to protect the elderly against economic deprivation. As a first step towards instituting pension reforms, Government of India moved from a defined benefit pension to a defined contribution based pension system • Tier-I account : This NPS account does not allow premature withdrawal and is available from 1 May 2009. In Tier I funds cannot be withdrawn before attaining 60 years. Maximum 60% can be withdrawn. 40% of the total balance available at the end of contribution year will have to be annuitized. • Tier-II account : The tier-II NPS account permits withdrawal. Since 1 April 2008, the pension contributions of Central Government employees covered by the National Pension System (NPS) are being invested by professional Pension Fund Managers in line with investment guidelines of Government applicable to non-Government Provident Funds. A majority of State Governments have also shifted to the defined contribution based National Pension System from varying dates. 27 State/UT Governments have notified the NPS for their new employees. No tax benefit in Tier 2 account.
    • Benefits of NPS It is basically for people who do not have the benefit of pension after retirement from service. The scheme gives an opportunity to the subscriber to build up his pension fund over a long period so that after retirement he can draw pension for his sustenance. Some of the benefits of the National Pension System (NPS) are: • It is transparent - NPS is transparent and cost effective system wherein the pension contributions are invested in the pension fund schemes and the employee will be able to know the value of the investment on day to day basis. • It is simple - All the subscriber has to do, is to open an account with his/her nodal office and get a Permanent Retirement Account Number (PRAN). • It is portable - Each employee is identified by a unique number and has a separate PRAN which is portable i.e., will remain same even if an employee gets transferred to any other office. • Online Access with IPIN log in details. View of Pension fund managers.
    • Agencies The various agencies in the scheme as under: 1. PFRDA( Controlling Body) 2. Bank of India( Trustee Bank) 3. NSDL( Central Recordkeeping Agency) 4. CRA- FC ( viz. KARVY) 5. POP( State Bank) 6. POP-SP( Branches) Is Nomination facility available? Yes and unlike in Bank’s account nominations can be made in favour of 3 persons. How can funds be contributed? Through Cash or Cheque. However credit to account in case of cheque can only be made available on realization of the Cheque. What is PRAN? Permanent Retirement Account Number which will be given to the subscriber on opening the Tier I account and which must be quoted in every transaction just like in case of bank account. As on 14th August, 2013, the number of subscribers under NPS is 52.83 Lakh with a corpus of Rs. 34,965 crore.
    • • Withdrawals will be permitted from the individual pension account subject to the conditions, such as, purpose, frequency and limits, as may be specified by the regulations. • At least one of the pension fund managers shall be from the public sector. Corporate benefit for employees: The employer can contribute 10% of an employees salary towards NPS and the entire amount is tax deductible under Sec 80CCD (2) without any monetary limit. In addition, the employee, can claim tax benefit under Sec 80CCC (1) upto a limit of Rs 1,00,000.
    • Investment Choice for Asset Allocation The Corporate as well as Subscriber can have any of the two choices for their asset allocation: Active Choice: Corporate/ Subscriber as the case may be will have the option to actively decide as to how your NPS pension wealth is to be invested across Asset class E (upto 50%), Asset Class C & Asset Class G. OR Auto Choice: In this option, the investments will be made in a life-cycle fund. Here, the fraction of funds invested across three asset classes will be determined by a pre-defined portfolio (which would change as per age of subscriber). Table for Life cycle fund is given below NOTE: Asset Class E - Investment in predominantly equity market instrument. Index based only. Asset Class C - Investment in fixed income instruments other than Government Securities Asset Class G - Investment in Government Securities.
    • Annuity options on vesting. The subscriber can purchase an annuity from any one of the PFRDA empanelled annuity service providers as per his choice or selection of the annuity type. Currently, the Indian life insurers who act as Annuity Service Providers provide the following type of annuities in India: • Pension(Annuity) payable for life at a uniform rate to the annuitant only. • Pension (Annuity) payable for 5, 10, 15 or 20 years certain and thereafter as long as you is alive. • Pension (Annuity) for life with return of purchase price on death of the annuitant (Policyholder). • Pension (Annuity) payable for life increasing at a simple rate of 3% p.a. • Pension (Annuity) for life with a provision of 50% of the annuity payable to spouse during his/her lifetime on death of the annuitant. • Pension (Annuity) for life with a provision of 100% of the annuity payable to spouse during his/her lifetime on death of the annuitant. • Pension (Annuity) for life with a provision of 100% of the annuity payable to spouse during his/her lifetime on death of the annuitant and with return of purchase price on death of the spouse to nominee.
    • Charges All the charges associated to Tier I account including Annual PRA Maintenance charge are paid by the employer. In case of Tier II account, activation charge and transaction charges are paid by the subscriber. The POP charges and the CRA charges are given in the table below:
    • Performance Parameters
    • Performance Parameters
    • Performance Parameters
    • Press Release Returns on NPS Scheme 2012_2013
    • Panel Discussion
    • Retirement Solution options Retirement Corpus Utilization
    • Quiz
    • Sources of Data http://india.gov.in/spotlight/national-pension-system-retirement-plan-all http://pfrda.org.in/ http://www.morningstar.in/posts/19360/debt-market-volatility-plays-spoiler-to-nps-returns.aspx www.valuresearchonline.com www.moneycontrol.com
    • Thank you for your time! Dilshad Billimoria Certified Financial Planner and Investment advisor. Website: www.dilzer.net Email: dilzerconsultants@gmail.com Phone: 91.80. 41512337 / 91.80. 41136147 Linkedin: in.linkedin.com/in/dilshadbillimoria