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NPS - National Pension System/New Pension Scheme
- 1. Confidential. NSDL e-Gov Internal use only โCelebrating an iconic journey of 20 yearsโ NSDL e-Governance Infrastructure Limited National Pension System 1
- 2. Confidential. NSDL e-Gov Internal use only NSDL - Celebrating an iconic journey of 20 years Connected with more than 8.20 crore citizens of India Promoters Maintaining more than 1.5 crore demat accounts Issued more than 15 crore PAN Cards 2
- 3. Confidential. NSDL e-Gov Internal use only Taking through the presentation 3 1. Planning for your retirement 2. NPS โ An Overview 3. Features of NPS โข Tax Benefit โข Scheme Preference โข Ease of Access 4. Withdrawal and Exit Options
- 4. Confidential. NSDL e-Gov Internal use only How do you see your Retired life? Life with financial constraints, dependent on children. or A dignified life, time to pursue interests and hobbies. 4
- 5. Confidential. NSDL e-Gov Internal use only Value of Investment @ 8% Start early, benefit moreโฆ Early starter Late starter Total Investment @ 60 Monthly Contribution Age Both invested the same amount Early starter ends up being richer by Rs. 18.32 L 5
- 6. Confidential. NSDL e-Gov Internal use only Solution ? 6
- 7. Confidential. NSDL e-Gov Internal use only Facts and Figures ๏ Total number of NPS Subscribers โ 1.5 crores and counting ๏ Daily A/C Opened โ 20,000 ๏ Daily Investment Credited โ 150 crores ๏ Daily Account Credited - 4.5 lacs 7
- 8. Confidential. NSDL e-Gov Internal use only ๏ Open for all Indian citizens between 18 โ 60 years ๏ Unique and Portable Permanent Retirement Account Number (PRAN) ๏ Tier I & Tier II ๏ Flexible Exit Options ๏ Tax Benefit under 80C as well as 80CCD(1B) Features of NPS 8
- 9. Confidential. NSDL e-Gov Internal use only 9 Unique tax benefit for NPS Investment With NPS Without NPS Tax Slab - 10% 20% 30% Amount Rs. 50,000 Rs. 45,000 Rs. 40,000 Rs. 35,000 After 20 years of Investment Corpus at @ 8% Rs. 22.8 lacs Rs. 20.5 lacs Rs. 18.3 lacs Rs. 16 lacs Corpus at @ 10% Rs. 28.6 lacs Rs. 25.7 lacs Rs. 22.9 lacs Rs. 20 lacs Additional Tax benefit of Rs. 50,000 u/s 80 CCD (1B)
- 10. Confidential. NSDL e-Gov Internal use only 10 Stakeholders in NPS Subscribers Pension Fund Manager Central Recordkeeping AgencyPoint of Presence
- 11. Confidential. NSDL e-Gov Internal use only CRA โ Roles and Responsibilities ๏ Account Opening ๏ Contribution Accounting ๏ Subscriber Servicing ๏ Exit Management ๏ Central Grievance Management System 11 PRAN CARD Transaction Statement
- 12. Confidential. NSDL e-Gov Internal use only Choice of PFMs For Government Sector Additional PFMs for Non-Government Sector 12
- 13. Confidential. NSDL e-Gov Internal use only Investment Option Active Choice Subscriber decides allocation pattern amongst E, C, G & A Auto Choice Funds managed on the pattern of a lifecycle fund 13 Asset Class Cap on Investment Equity (E) 50% Corporate Bonds (C) 100% Government Securities (G) 100% Alternate Investment Fund (A) 5% Life Cycle Funds Investment in Equity upto Aggressive Life Cycle Fund (LC 75) 75% Moderate Life Cycle Fund (LC 50) 50% Conservative Life Cycle Fund (LC 25) 25%
- 14. Confidential. NSDL e-Gov Internal use only 24X7 access 14 Bi-lingual Interactive Voice Response (IVR) using T-PIN View details / Change of contact details, scheme preference online using I-PIN Instant reset of T-PIN & Online reset of I-PIN through OTP Online complaint resolution platform Mobile App Online Transaction Website
- 15. Confidential. NSDL e-Gov Internal use only Partial Withdrawal ๏ Withdrawal will be allowed subject to ๏ผ Subscriber should be in NPS for 10 years ๏ผ Amount should not exceed 25% of the contributions made by the subscriber ๏ผ Withdrawal can happen only against specified reasons Withdrawal option are limited to ensure sufficient terminal corpus 15
- 16. Confidential. NSDL e-Gov Internal use only Exit Process At the age of 60 Rs. 30 lacs Corpus Rs. 12 Lacs Rs. 18 Lacs No Service tax of 1.4% You can defer your lumsum withdrawal and contribute till the age of 70 Most preferred pension scheme is 100% Annuity to Spouse with Return of Principal 16
- 17. Confidential. NSDL e-Gov Internal use only Exit before the age of 60 years โข 20% of Lump sum withdrawal and balance 80% need to be annuitized At least 10 years under NPS / resignation from Govt job โข For Government subscriber: 20% of Lump sum withdrawal and balance 80% need to be annuitized (currently 100% payout to claimant as per PFRDA circular) โข For Non-Government subscriber: 100% payout to claimant In case of death of the subscriber 17
- 18. Confidential. NSDL e-Gov Internal use only Annuity Service Providers 18 ๏ Annuity for Life ๏ Annuity for Life with Return of Principal ๏ 100% Annuity to Spouse ๏ 100% Annuity to Spouse with Return of Capital
- 19. Confidential. NSDL e-Gov Internal use only CRA Charge Structure Intermediary Charge Head Charges (excluding Tax) Method of Recovery CRA One time Account opening charge Rs.40 Redemption of units on a quarterly basis Annual Maintenance Charge Rs. 95 Transaction (contribution, change in scheme preference, switch and withdrawal) Rs.3.75 19
- 20. Confidential. NSDL e-Gov Internal use only Effect of charges on corpus 20 ๏ Investing Rs. 50,000 per annum for 25 years ๏ Charges for Option A is 0.25% and Option B is 2.25% ๏ Return on Investment (CAGR) for both the investment options is 8% Corpus under Option A will be 23.9 Lacs Corpus under Option B will be 18.5 Lacs
- 21. Confidential. NSDL e-Gov Internal use only Scheme wise return Available at NPS Trust Website http://www.npstrust.org.in/index.php/navreturns/returns 21
- 22. Confidential. NSDL e-Gov Internal use only Snapshot ๏ How can I open a NPS account ? ๏ Who will invest my money and where it will get invested? ๏ Activation/Importance of complimentary Tier II account. ๏ Where do I go to make contribution in NPS? ๏ Availing Multiple tax benefits u/s 80CCD(1), 80CCD(2) & 80CCD(1B) ๏ Choose your Pension Plan and retire happily! 22
- 23. Confidential. NSDL e-Gov Internal use only Benefits of NPS Benefits Of NPS Simple Flexible Portable Strong Regulation Tax Savings Transparent Cost Structure 23
- 24. Confidential. NSDL e-Gov Internal use only Tel: 022- 4090 4242 Helpline-:1800 222 080 www.npscra.nsdl.co.in facebook.com/nps.NSDL 24
- 25. Confidential. NSDL e-Gov Internal use only Tier I is mandatory for opening Tier II 25 Tier I Pension Account Mandatory Multiple Tax Benefit Tier II Investment Account Optional Anytime withdrawal Two Tier Structure Investment option can be different for both accounts
- 26. Confidential. NSDL e-Gov Internal use only PRAN CARD VIEW
- 27. Confidential. NSDL e-Gov Internal use only Statement of Transaction
- 28. Confidential. NSDL e-Gov Internal use only Statement of Transaction
- 29. Confidential. NSDL e-Gov Internal use only Statement of Transaction
- 30. Confidential. NSDL e-Gov Internal use only Online Reset
- 31. Confidential. NSDL e-Gov Internal use only Online Reset
- 32. Confidential. NSDL e-Gov Internal use only Online Reset
Editor's Notes
- To tell about; Who we are (one liner as we have to say in detail in next slide) Why we are conducting this session/ objective of conducting SAP Also tell about previous visit/SAPs at the location Booklet placed on seat, leaflets, question slip Tell in brief, how the session will be conducted in next 1 and half hrs Tell about the scope of the session (policy level matters are outside the scope of this forum) To Ask; if crowd is in decent number How many are NPS subscribers? How many Govt. Subs? How many came to know through alerts (sms/email)? How many came to know through News Paper Ad? If the crowd is in small numbers then create a small cluster group and go through their concerns and run only important topics of PPT.
- Speak about; Confidence on NSDL; Indiaโs first and largest depository (No. of Demat a/c holders-1.54cr) Tell about Different important projects we are handling like PAN (numbers-15cr), Aadhaar (numbers-8.2cr) Tell about, we are celebrating iconic journey of 20 years Strong Brand presence Promoted by reputed organizations like IDBI, UTI, NSE
- During the course of the presentation, we shall cover the following topics What is the importance of retirement planning Overview of NPS What are the features & benefits ( investment choice, Tax benefit, ease of access) of NPS? How NPS is different from other investment/retirement product Flexible exit Options
- We donโt have to talk much on this slide, just a thought to ponder upon in the minds of the subscribers.
- Tell about the challenges we are facing while retirement planning In 20s: We think its too early In 30s: Setting up a family In 40s: Children education and housing takes the priority In 50s: There is a sense of urgency for retirement savings By 60: Itโs too late And, Explain about the importance of early start with the help of given illustration. It is also important to say the importance of Compounding. Say, even lesser investment started at appropriate time leads to bigger corpus at retirement
- Now the question may be where to invest, how to invest? We are going to discuss here National Pension system as a solution of your retirement planning and how it will help you in creating corpus for your pension. Some of you already have NPS account, so, we shall discuss its features & benefits as well. Before going into details, we shall discuss the background of NPS in brief: Launched by Government of India for its employees form January 1, 2004 Based on the principal of defined contribution Extended to Non- Government, to provide a platform for planned retirement to the working population Unique in terms of the investment lifecycle with the flexibilities it offers to Subscriber. Unlike other financial products, there is flexibility of changing PFM and option to customize asset allocation. We have to continue this with next slide with facts and figure.
- We have to link this slide with previous slide and tell the above facts giving emphasis on the large numbers associated with NPS.
- Explain Unique & Portability of PRAN. Cite examples of Inter sector Shifting scenarios. The NPS provides the subscriber with an option to have two types of accounts i.e. Tier I ( Retirement ) and Tier II (Investment). Tier I is a non withdrawable account which is to be maintained for building up the requirement corpus. Click on hyperlink and speak in detail about Tier II account, How to open, contribute, withdrawal facility without exit load, no additional AMC At the time of exit, subscriber needs to use a portion of the holding to purchase annuity from empaneled ASP. This will generate pension income for the subscriber. The rest can be withdrawn in lump sum. You can defer your lumsum withdrawal and stay invested till the age of 70. The entire withdrawal process has been made online for the ease of subscribers starting from 1st April 2016. 4. Explain Tax benefit in Detail . The contribution made in the scheme (NPS Tier I) qualifies for deduction u/s 80C NPS is also eligible for additional deduction upto 50,000 in a financial year for tax rebate u/s 80CCD(1B).of 70
- In continuation of the previous slide; Let us observe the unique benefit of the tax rebate u/s 80CCD(1B), let us take an example of a person who contributes Rs. 50,000/- per year for 20 years Highlight that approx. 9 lakh more generated at 10% return over the period of 20yrs If you consider the investment for 25 yrs, The indicative difference will be even more by approx. 2 lakhs. NPS is the only product where you can get this additional benefit
- Speak about unbundled architecture NPS works on an unbundled architecture wherein different entities come under one umbrella to operationalize NPS system. Each entity is given the responsibility based on their core competence. Each entity has limited access to data based on the responsibility it performs Under the architecture of the system each and every entity who is part of the system, is governed by Service level agreement. The performance of the Pension Fund Mangers (PFMs) are closely monitored by NPS trust, the investment guidelines are issued to the PFMs through NPS trust. PFRDA has also enabled a central grievance redressal system which always keeps the subscriber interest intact. Speak about Importance of CRA CRA is a repository of data, forms and KYC documents CRA provides the operational platform connecting all the entities Support system for all the stakeholders
- In continuation with talking points of previous slide; Explain the key roles and responsibilities of CRA as given above. Explain in detail about the activities performed by CRA. Explain both the clouds: PRAN Kit contains PRAN Card, Information brochure, welcome letter and Subscriber Master Report Transaction statement talks about total contributions made to the account, total value of your contributions, returns earned by your contributions, scheme details, investment details, and the XIRR value (returns on investment). Contribution details given in transaction statement can be utilised for Tax Benefits.
- Explain how the investment in Government sector is carried out, its PFM (SBI, LIC and UTI) and allocation of Fund For Non-Government sector: Tell 4 additional Pension Fund Manager for Non-Government All are established Fund houses Explain the power of liberty to choose your own PFM Changing of PFM SBI is the default PFM for non-government sector if they donโt exercise the option. Explain, when you change fund manager in mutual fund, you have to pay tax, but when you switch PFM in NPS, there is no tax implication. Tell, you can change PFM once and investment choice twice in FY.
- Explain, how and where your Fund will get Invested; NPS offers you two approaches to invest in your account, Explain Auto and Active choice in detail Unlike traditional investment products, NPS offers you with the flexibility to design your own portfolio. Depending on your risk appetite, you can design your portfolio by allocating your funds among the following four asset classes: Equity or E Corporate Debt or C Government Securities or G Alternate Investment Fund or A Designing your portfolio can be a little delicate and time consuming at times. NPS gives you the flexibility to opt for a dynamic allocation of your portfolio in case you do not want to exercise an Active choice. You can opt for Auto choice, wherein your money will be invested in all three asset classes - E, C and G - in defined proportions based on your age. When you are younger, a larger share will be in the high risk-high return option; and as you approach retirement, the proportion in the low risk- low return option becomes maximum. Speak about the available three flavours (aggressive, moderate, conservative) and LC 50 is the default life cycle fund Tell, this will be applicable for Tier II as well and can have different set of choice Gov. subscriber can exercise above mentioned option for Tier II account
- Explain how easily you can get information/updates about NPS You can get information through: IVR Corporate Website Mobile App Online Services; View account details /current holding Contribute Online View last 5 contributions Change your Password Request Transaction Statement to your email Change Scheme Preference Update Address Change your contact details (Tel./Mobile/email ID) Raise grievance against any entity by logging in to online complaint resolution platform Subscriber can download NPS mobile app from google play store and ios App store and do a lot of activities on the go like making contribution, resetting of i-pin, changing mobile number and email id, changing scheme preference etc. ( More than 2.5 lakh subscribers have already downloaded the Mobile App) Subscriber can now log in to eNPS - www.enps.nsdl.com and open his/her NPS account online paperless within a few minutes using Aadhar. (tell current number) Speak about, for complementing the Digital India initiative, we have taken many such steps . Subscriber are now not required to approach nodal offices to get aforesaid services. You will now get NPS related services at your finger tip.
- Explain that Partial withdrawal should be used only in case of emergencies, it is not a good idea to withdraw your retirement corpus before retirement. Explain that it is advisable to have Tier II account for short term financial goals. It is very easy to open a Tier II account and your short term withdrawal need should depends on Tier II account only. Partial withdrawal Guidelines; Subscriber should be in NPS for 10 years Withdrawal can happen only against specified reasons Amount should not exceed 25% of the contributions made by the subscriber Withdrawal will be allowed maximum three times during the entire tenure of subscription with a gap of at least five years between two partial withdrawals.
- Explain exit process in detail, the salient points which can be discussed are as follows; In the above example, for 100% annuitisation, pension will be 16,700, Typically annual pension for Rs. 1000 is around Rs. 60 to 70 If you buy pension from NPS, the service charge is waived off. If you buy annuity from any other service provider in the market, you have to pay the service charge. Option to remain invested till the age of 70. Option to withdraw the entire accumulated pension wealth in a case of amount is equal to or less than Rs.2,00,000/- Subscriber also has an option of deferring his lumpsum withdrawal by 10 years and that can also be withdrawn in phase manner
- For Govt, as of now, 100% is given to nominee In case of exit before 60: At least 80% of the accumulated pension wealth of the subscriber needs to be utilized for purchase of an annuity providing for monthly pension to the subscriber and balance is paid as lump sum payment to the subscriber Death Case: The entire accumulated pension wealth (100%) would be paid to the nominee / legal heir of the subscriber and there would not be any purchase of annuity/monthly pension. For Government Subscriber, Provision for pension to nominee in case of death of Subscriber is yet to be started
- Speak about ASP and its schemes; Most preferred Annuity Scheme is 100% Annuity to spouse with return of principal. Talk about, how the annuity rates are fared with Bank rate; The Bank rate have changed in the last 10 years Longevity covered by ASP in pension plan as you canโt open FD for more than 10 yrs and here ASP is covering the life span of more than 30-40 yrs
- Donโt read the slide. Tell it like a story that the total cost of maintaining your NPS account for a year is less than you monthly mobile bill. It is worth mentioning that NPS is one of the low cost pension product available across the globe. In addition there are; Contribution charges at POPโ 0.25% PFM charges โ 0.01% NPS Trust- 0.01% of AUM Custodian charges-0.0032% of AUM
- Explain, how the low cost structure of NPS can impact your corpus in 25 yrs Without investing a single penny more NPS is generating appox. 5 lakh more in case you are investing Rs 50,000 per year in NPS. And this is when we are taking return very conservatively (@8%)
- We can say; For Govt subscribers, your colleagues who are not part of NPS are getting around 8% in GPF and you can see the returns of NPS. The government schemes have less than 10% in equity still have given more than 13.5%.
- This slide is for to reiterate how and where a person can open NPS account, how to invest and get Pension. In brief, we have to go through what ever we already have said in previous slides.
- This is to summarize the benefits and important features of NPS
- Say Thanks for attending the session and you can still connect with us through Facebook and visit our website for additional details. If you have any questions, please give in writing (question slips are placed on chair) so that we can answer one by one.
- Investment choice can be different in both the accoutn No limit on number and amount of contribution