The document discusses key aspects of the New Pension Scheme (NPS) introduced by the Government of India in 2004 as a major pension reform. Some key points: 1) NPS replaced the existing defined benefit pension system and introduced a mandatory defined contribution system for all new recruits to central government service from 2004. 2) The scheme is regulated by the Pension Fund Regulatory and Development Authority (PFRDA) and administered through intermediaries like the Central Record Keeping Agency, Pension Fund Managers, and nodal offices. 3) Contributions from employees and the government are pooled and invested by Pension Fund Managers in a variety of instruments. Accumulated savings can be used to purchase

1. Saradamani
DCS&EM/DAE

2.  The New Pension Scheme is a major Pension
reform
 It was decided by the Government that the
existing provisions of defined benefit
Pension and GPF would not be available
to the new recruits in the Central Govt
service on or after 1-1-2004
 Instead a major initiative was undertaken by
the GOI to provide income security after
retirement called the NPS
2

3.  This initiative of Government is to create a
corpus for uninterrupted payment of
pension to the Government Employees after
retirement
 The Government approved of this scheme
on 23rd August 2003
 The New Pension system commenced from
1st January 2004
 All those recruited on or after 01.01.2004
contribute to this scheme
3

4.  It is also a mandatory scheme for all new
recruits except the Armed forces
 An independent PFRDA will regulate the
pension market
 From 1st April 2008 the contributions of the
CGS to the NPS are dealt by professional
pension fund managers
 They follow the investment guidelines of
GOI
4

5.  It will use the existing bank branches and
post offices to collect the contributions
 It will be a seamless transfer of accumulation
in case of change of employment / and or
location
 Individuals can exit after the age of 60 from
the pension system
 At the time of exit the individual will have to
pay 40% of pension wealth to purchase
annuity
5

6.  The New Pension Scheme works on defined
contribution basis
 There are two tiers – Tier-I and II at
present
 Contribution to Tier-I is mandatory for all
Government servants joining Government
service on or after 1-1-2004
 Tier-II will be optional and at the discretion
of Government servants.
6

7. Tier-I
 A GS will have to make a contribution of 10%
of BP + GP + DA, (NPA where applicable)
 This will be deducted from the salary bill
every month by the PAO concerned.
 The Government will make an equal
matching contribution.
 The recoveries will commence from the
following the GS joins service
 E.g. DOJ 01.01.2011- recovery will
commence from the month of Feb 2011
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8.  One can exit at the age of 60
 The annuity will provide pension to the
- Government servant
- Spouse
- Dependent parents
 The remaining amount will be paid in
lumpsum
 Those who exit prior to the age 60 their
annuitasition will be 80%
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9.  Tier-I contributions (and the investment
returns) will be kept in a non-withdrawable
Pension Tier-I Account.
 Tier-II contributions will be kept in a
separate account that will be withdrawable
at the option of the G S
 Government will not make any contribution
to Tier-II account
9

10.  The facility of Tier II account is being offered
form December 1, 2009 to all citizens of
India including Government employees
mandatorily covered by NPS.
 Unlike Tier I which is a non-withdrawable
pension account with an aim to provide a
window of liquidity to NPS subscribers.
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11.  Both tier I (Pension Account) and Tier II
(Savings Account) will be pure retirement
savings products
 The only distinction being that Tier I is a
non-withdrawable account while Tier-II is a
withdrawable account to meet financial
contingencies
 The Tier-II would enable the existing holders
to build savings through investments over
and above those in the Tier I pension account
11

12.  . An active Tier I account will be a pre-
requisite for opening of a Tier II account.
 No additional CRA charges will be levied for
account opening and annual maintenance in
respect of Tier II.
 However, CRA will charge separately for each
transaction in Tier II, the charges being
identical to the transaction charge structure
in Tier I.
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13.  Minimum contribution at the time of account
opening - Rs. 1000/-
 Minimum amount per contribution - Rs.
250/-
 Minimum Account Balance at the end of FY -
Rs. 2000/-
 Minimum number of contributions in a year -
4
ns.

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14.  (Minimum One contribution in case a
subscriber joins in the last quarter)
 Penalty of Rs. 100/- to be levied on the
subscriber for not maintaining the minimum
Account balance and/or not making the
minimum number of contributions
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15.  There will be no limits on number of
withdrawals
 There will be facility for separate nomination
and scheme preference in Tier II
 The subscriber would have the same choice
of PFMs and schemes as in the case of Tier I
account in the unorganized sector
 Contributions can be made through any
POP/POP-SP.
15

16.  There will be facility of one-way transfer of
savings form Tier II to Tier I
 Bank details will be mandatory for opening a
Tier II account
 No separate KYC for Tier II account opening
will be required; the only requirement is a pre
existing Tier I account.
16

17.  The other positive aspect of NPS is Govt has
formulated various blends of investment
options according to risk taking capabilities
of an employee
 For e.g.funds of G S are invested mainly in
government securities and bonds
17

18. Type of Investment % in Pension
fund
Govt. Securities upto 55%
Debt, Securities, Corporate
Bond/PSU Bonds ,etc upto 40%
Equity including equity-linked
schemes of Mutual Funds
upto 15%
Money Market Instruments upto 5%
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19. 19

20.  NPS is a well structured Defined
Contribution Pension system with well
defined system architecture having
specified roles of various entities
Pension Fund Regulatory and Development
Authority
 The Pension Fund Regulatory and
Development Authority (PFRDA) is entrusted
the responsibility to regulate and develop
the pension market in India
20

21.  The roles and responsibility of PFRDA include
carrying out regulatory changes, overseeing
quality and provision of services of NPSCAN,
CRA, PF's Trustee Banks etc.,
New Pension System (NPS) Trustee
 NPS Trust has been set up for taking care of
assets and funds under the NPS
 Trust has been appointed by PFRDA
 Trustee is responsible for taking care of
Funds under NPS
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22. Central Record Keeping Agency (CRA)
 CRA would undertake Record Keeping,
Administration and Customers service
 National Securities Depository Ltd (NSDL) has
been appointed as the CRA for the NPS.
 The main functions and responsibilities of
CRA will include: Recordkeeping,
Administration, and Customers Service
function for all subscribers of the New
Pension System.
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23. 23

24.  a)The recordkeeping, administration and
customer service functions for all
subscribers of the New Pension System will
be centralized and performed by the CRA
 b)The CRA will issue unique Permanent
Retirement Account Number (PRAN) to each
subscriber, maintain database of all PRANs
and record the transactions related to each
subscriber’s PRAN
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25.  c)The CRA shall be responsible for receiving
funds and instructions from subscribers
through the nodal offices, transmitting such
instructions and funds to the appointed
Pension Fund Managers, trustee Bank,
Annuity Service Provider effecting switching
instructions received from subscribers
 issued by the PFRDA from time to time
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26. 26
 d)The CRA will provide periodic
consolidated Statement Of Transaction
(SOT) to each subscriber and discharge such
other duties and functions as may be
determined by the guidelines, directions
and regulations

27.  e)The CRA will be responsible to maintain
absolute confidentially of all records, data
and information. CRA shall produce all this
information as and when called for by
PFRDA and reporting allocation of units into
each PRAN.
 f)The CRA will be responsible for timely
transfer of subscriber contributions
information, timely allocation of these
funds by PFs, and accurately crediting
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28.  The new pension system would be based on defined
contributions. It will use the existing network of
bank branches and post offices etc. to collect
contributions
 There will be seamless transfer of accumulations in
case of change of employment and/or location
 It will also offer a basket of investment choices and
Fund managers.
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29.  Nodal Offices is a generic term used for the
Government offices such as Principal
Accounts Office (Pr.AO), Pay and Accounts
Office (PAO) and Drawing and Disbursing
Officer (DDO) under Central Government or
similar offices under Central Government
/State Government/Autonomous Bodies
which will interact with CRA on behalf of the
Subscribers for the purpose of New Pension
Scheme
29

30.  Monitor the performance of PAO and DDO
in discharging their responsibilities towards
the Subscribers in the CRA ·
 Take necessary action to ensure compliance
by PAO and DDO with the operational
procedures of CRA ·
 Consolidate the PAO registration forms and
forward it to CRA for registration. Monitor
the resolution of grievances raised against
PAO
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31.  PAO is responsible for carrying out the
following activities:
 Consolidate DDO registration forms &
forward it to CRA for registration.
 Facilitate registration of Subscribers by
consolidating the Application for allotment
of PRAN received from the concerned DDO
and forward it to the CRA-FC.
 Upload Subscriber Contribution File (SCF) to
NPSCAN system.
1.
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32.  Deposit the contribution amount in the
Trustee Bank as per the SCF uploaded in
NPSCAN.
 Update the Switch requests, New Scheme
Preference requests, Withdrawal Requests &
the request for change in Subscriber details
received from Subscribers through NPSCAN.
 Raise grievance on behalf of DDO and the
Subscriber.
 Resolve the grievance rose against it by any
entities in the CRA system.
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33.  DDO is responsible for carrying out the
following activities:
 Obtain the duly filled Application for
allotment of PRAN from the Subscribers, fill
and certify the employment details and
forward the same to PAO.
 Distribution of PRAN kit, I-PIN, T-PIN to
Subscribers. to Subscribers.
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34.  Forward the Switch requests, New Scheme
Preference requests, Change in Subscriber
details request, Withdrawal Requests received
from Subscribers to the PAO
 Provide information to PAO about
Subscriber’s pension contribution
 Forward grievances of the Subscriber to the
PAO.
 Disburse payment for withdrawal
34

35.  NPSCAN is a web based "NPS Contribution
Accounting Network" developed by CRA to
maintain accounts of Govt Subscribers.
 PAO can access NPSCAN for uploading
Subscriber contribution file, updating various
types of request of Subscribers such as
change in Subscriber details, change in
scheme preference, switch, withdrawal etc.
Nodal Office can access NPSCAN with the
User ID and I-PIN allotted by CRA.
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36.  Issue of unique Permanent Retirement
Account Number (PRAN) to each subscriber,
maintaining a data base of all subscribers,
and recording transaction relating to each
subscriber
 Under the new pension system, CRA will be
required to maintain subscriber accounts and
issue a unique Permanent Retirement Account
Number (PRAN) to each subscriber.
36

37.  In this system, deductions towards NPS will
be made from subscriber’s salary on monthly
basis and equal amount of contribution will
be made by the Government.
 The accumulated amount will be reflected in
his/her Permanent Retirement Account while
he/she is working and shall use the
accumulations at retirement to procure a
pension for the rest of his/her life.
37

38.  Subscribers in this system shall enjoy certain
facilities and rights including
-portability across jobs and locations,
-choices of selection of Pension Funds
-investment schemes
-freedom to switch between service providers
-nationwide access.
38

39.  The Trustee Bank will maintain the account of
the Trustee and will receive credits from the
government department or its agencies and
transmit the information to the CRA for
reconciliation. The Trustee bank shall remit
the funds to the Pension Fund Managers,
Annuity Service Providers (ASP). NPS Trust has
appointed Bank of India as the Trustee Bank
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40.  The Custodian will provide Custodial Services
to the Pension Funds, which will include
among others to ensure that benefits due on
the holdings are received, provide detailed
reports to the PFs etc. NPS Trust has
appointed Stock Holding Corporation of India
Ltd as the custodian for the new pension
system
40

41.  The role of annuity service providers (ASPs)
will be critical in the NPS, since they will offer
annuity to the subscribers when members
reach superannuation or withdraw pension
assets.
 As per the provision there would be
mandatory annuitization, and the members
have to purchase annuity from ASPs.
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42.  Why is it mandatory to use 40% of pension
wealth to purchase the annuity at the time of
the exit (i.e. after the age of 60 years) from
NPS?
 This provision has been made in the New
Pension Scheme with an intention that the
retired government servants should get
regular monthly income during their retired
life
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43.  Whether any minimum age or minimum
service is required to quit from Tier-I?
 Exit from Tier-I can only take place when an
individual leaves Government service
 Whether contribution towards Tier-I from
arrears of DA is to be deducted?
 Yes. Since the contribution is to be worked
out at 10% of (Pay+ DP+DA), it needs to be
revised whenever there is any change in these
elements
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44.  What happens if an employee gets transferred
during the month? Which office will make
deduction of Contribution?
 As in the case of other recoveries, the
recovery of contributions towards New
Pension Scheme for the full month (both
individual and government) will be made by
the office who will draw salary for the
maximum
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45.  Whether NPA payable to medical officers will
count towards ‘Pay’ for the purpose of
working out contributions to NPS?
 Yes. Ministry of Health & Family Welfare has
clarified vide their O.M. no. A45012/11/97-
CHS.V dated 7-4-98 that the Non-Practising
Allowance shall count as ‘pay’ for all service
benefits.
 Therefore, this will be taken into account for
working out the contribution towards the New
Pension Scheme.
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46.  Whether a government servant who was
already in service prior to 1.1.2004, if
appointed in a different post under the
Government of India, will be governed by the
CCS (Pension) Rules or NPS?
 In cases where Government servants apply
for posts in the same or other departments
and on selection they are asked to render
technical resignation, the past services are
counted towards pension under CCS (Pension)
Rules, 1972) Rule
46

47.  Since the Government servant had originally
joined government service prior to 1-1-2004,
he should be covered under the CCS (Pension
47