New pension scheme (NPS) is a defined contribution scheme that covers the citizens of india (resident or nonresident) in the age group between 18 and 55 years. NPS is regulated by the pension fund regulatory and development authority (PFRDA).

Salient features:

• Options are available for both fund and fund manager
• Participant of the scheme gets a retirement corpus at the age of 60
• Of the total fund, participant or contributor gets 60 percent as cash in hands and rest (40%) goes in buying an annuity plan from an insurer
• Contributor to NPS can opt for not withdrawing 60 % and let it be invested in the NPS. However, he has to withdraw 10% of corpus every year till he attains the age of 70. Any balance left will be paid at the age of 70 years.
• If you wish to withdraw before attaining 60 yrs of age, you’ll get only 20% as cash in hand and rest need to be used for buying annuity plan
• Till date there is only one mandatory account, known as Tier I account, is available. There is possibility of launch of Tier II account (optional) with facility of withdrawal in near future
• An annual contribution of Rs 6000 is mandatory for participation in NPS
• Minimum single contribution is Rs 500.

Investment options:

Three asset classes namely equity, fixed income instruments other than government securities, and government securities are available for investment. However, following restrictions are applied:

1. 50 % of total contribution can be invested in the equities, or
2. 100 % of total contribution can be invested either in fixed instruments (other than Govt. securities) or in Govt. securities
3. Contributors can opt for “auto choice” also where 50 % of contributions are invested in equities till the age of 35 years and thereafter reduced gradually to 10 % by 55 years of age.

Fund managers:

Contributors to NPS can choose a fund manager from the following list:

1. ICICI Prudential
2. IDFC
3. Kotak Mahindra
4. Reliance Capital
5. SBI Pension Fund
6. UTI Retirement Solutions

Charges to be paid:

Contributors have to pay two type of charges:

1. Fixed charges:

a) Rs 50/- (One time charge for issuing Permanent Account Number)

b) Rs 40/- (initial subscriber registration & Rs 20 for any subsequent transaction)

c) Rs 350/- (annual maintenance charge)

d) Rs 10 /- for every transaction from fund value

2. Variable charges:

a) 0.0075 – 0.05 % of fund value per annum as custodian charge

b) 0.0009% of the fund value per annum as management charge

How to contribute in NPS?

Anyone willing to contribute in the NPS has to fill up a form available with several banks identified as Points of Presence (PoP) or distributors and submit the same to PoP. The details filled in the form will be transferred by PoP to the Central Record keeping Agency (CRA). CRA will allocate the fund and fund manager as per contributor’s options.