All About The New Pension Scheme

The New Pension Scheme, known as NPS, is a defined contribution scheme launched by the central government under the aegis of the Pension Funds Regulatory and Development Authority – PFRDA to facilitate regular income post-retirement its subscribers.

Important features of the NPS

Any Indian citizen in the 18 – 60 years age bracket can participate in it.

There are two types of accounts Tier I and Tier II. Tier I is well-suited for retirement planning with a defined lock-in and tax benefit. Tier II accounts act as a voluntary savings account without lock-in and tax benefits.

Investment can be made in different asset classes (equity - E, corporate bonds - C, government securities - G, alternate assets) through six fund managers.

Tax exemption upto Rs. 50,000 under section 80CCD (1B), over and above Rs. 1,50,000 under section 80C.

Minimum annual contribution of Rs 1,000 for reasonable pension post Retirement.

Assets Allocation

Investors can choose from one of the two options:

• Active choice: Investor can invest in E-C-G (equity - E, corporate bonds - C, government securities - G, alternate assets)but allocation to E cannot exceed 50%.
• Auto choice:Investor delegates the asset allocation to a lifecycle fund which has a predefined E-C-G allocation based on age.

What makes the NPS attractive

• Cost effective fund management vis a vis other investing instrument.
• NPS account are portable, irrespective of change in employment, city or state
• Superannuation Fund transfer to NPS account without any tax implication is a plus for retirees.