NEW PENSION SYSTEM (NPS)
(Pension nahin yeh PRAN hai) Central bank of India has entered into an agreement with PFRDA (Pension Fund Regulatory and Development Authority) for functioning as one of the PoP (Point of Presence) for their New Pension System (NPS). Our Bank has designated 1006 Branches to function as Point of Presence- Service Providers (PoP-SPs) for handling NPS accounts.
Main Features and Architecture of the New Pension Scheme
New Pension System(NPS)for all Citizens was introduced by GOI and managed by the Pension Fund Regulatory and Development Authority(PFRDA), the regulator of pension fund in our country, to secure the old age income by way of giving an annuity i.e. pension, once the subscriber(s) attains the age of 60.
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NPS is a voluntary scheme of Pension System of PFRDA (Pension Fund Regulatory and Development Authority) open to all citizens in the age group of 18-60 years.
- The Scheme is operative from 01.05.2009.
- objective is to provide old age pension with market driven returns over long term
- Bank's designated branches i.e. Point of Presence-Service Provider (POP-SPs) accept the application form and get the subscriber(s) registered with Central Record keeping Agency (CRA) for generation of the Permanent Retirement Account Number (PRAN).
- The PRAN will be quoted in all future transactions.
- There are two types of account i.e. Tier I and Tier II.
- Tier-I account is where subscriber(s) can contribute their savings for retirement into a non-withdrawable account till they reach 60 years and draw pension for the rest of their life.
- In case of Tier I
- Minimum contribution at the time of account opening -Rs.500/-
- Minimum amount per contribution - Rs. 500/-
- Minimum Account Balance at the end of FY - Rs. 6000/-
- Minimum number of contributions in a year - 1
- The subscriber(s) can exit the scheme after attaining 60 years of age. He/She has to compulsorily annuitize 40% of the accumulated pension wealth. Option to annuitize 100 % of the corpus is also available.
- A Tier-II account is a voluntary savings account form which subscriber(s) are free to withdraw their savings whenever they wish.
- The facility of Tier II account is being offered from December 1, 2009 to all citizens of India including Government employees mandatorily covered by NPS.
- The Tier-II would enable the existing Permanent Retirement Account (PRA) holders to build savings through investments over and above those in the Tier I pension account. An active Tier I account will be a pre-requisite for opening of a Tier II account.
- No additional CRA charges would 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
- There are no limits on number of withdrawals in Tier II.
- There is facility for separate nomination and scheme preference in Tier I and Tier II.
- There is facility of one-way transfer of savings from 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.
- In case of Tier II
- 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 - 1
- In case of Composite Application for Tier I and Tier II both, Minimum contribution at the time of account opening is Rs. 1500/-.
- The Subscriber(s) will be informed of the Permanent Retirement Account Number (PRAN) by the CRA. Once the CRA provides the PRAN, the subscriber(s) can start depositing his subscriptions through his chosen POP-SP.
- The CRA keeps a record of all subscriptions.
- A subscriber(s) has three options for his investments(Active choice):
- HIGH RISK HIGH RETURN(Asset Class E): Investments in predominantly Equity Market Instruments.
- MEDIUM RISK MEDIUM RETURN (Asset Class c): Investment in debt securities other than Government Securities.
- LOW RISK LOW RETURN (Asset Class G): Investments in Government Securities.
- A subscriber(s) opting for Active choice may select the available asset classes "E", "G", & "C". However the sum of percentage allocation across all the selected asset classes must equal 100. Allocation under Equity (E) cannot exceed 50%
- Subscriber(s) can also opt for Auto choice* -lifecycle Fund who do not have the required knowledge to manage their NPS investments. With this option, the system will decide on a mix of investments among the three asset classes, based on the age of the investor. In this option, the investments will be made in a life cycle fund. Here, the percentage of funds invested across three asset classes will be determined by a pre defined portfolio. At the lowest age of entry (18 years), the auto choice will entail investment of 50% of pension wealth in "E" Class, 30% in "C" Class and 20% in "G" Class. These ratios of investment will remain fixed for all contributions until the participant reaches the age of 36. From age 36 onwards, the weight in "E" and "C" asset class will decrease annually and the weight in "G" class will increase annually till it reaches 10% in "E",10% in "C" and 80% in "G" class at age 55.