NPS subscriber can choose between the active choice and auto choice asset allocation To secure an individual and their family's future, it is often advised to take a pension savings plan.
Among several such pension savings plans in the market, the National Pension System (NPS) is considered credible and safe as it's offered by the government agency PFRDA (Pension Fund Regulatory and Development Authority).
From May 2009, the national pension system (NPS) was made available to all citizens and the corporate sector model was launched in December 2011.
Notwithstanding the model one chooses, the subscribers have an array of pension funds managers (PFMs) to choose from: These are SBI Pension Funds, LIC Pension Fund, UTI Retirement Solutions, ICICI Prudential Pension Funds Management Company, Kotak Mahindra Pension, Reliance Capital Pension Fund.
The PFMs tend to release daily NAVs (net asset values) to ensure subscriber can take informed decisions.
The corporate subscriber can join the NPS through any of the existing POP (point of presence).
The POP will be the interface between the corporate/ subscribers and the NPS architecture.NPS (National Pension System): Five Things To Know1.
Advantages: The NPS has a series of advantages.
It can be prudentially regulated, has low cost, ensures complete portability, offers flexibility and is web-enabled.
All transactions can be tracked online through the CRA (central recordkeeping agency) system.
Employer can employee can check fund and contribution status through CRA website.2.
Allocation Choices: The National Pension System (NPS) subscriber can choose between the active choice and auto choice asset allocation.
Under the active choice, the subscribers will have the option to actively decide as to how your NPS pension wealth is to be invested across Asset class E (upto 50%), asset class corporate debt and government securities.
In the auto choice, the funds are invested across three asset classes as per a pre-defined portfolio which would change as per the age of subscriber.: NPS Could Offer Option To Invest Up To 75% Of Your Money In Stocks3.
Types of Accounts: There are two accounts of NPS.
There is one tier 1 account and there is one tier 1 account.
In the tier 1 account, the minimum amount per contribution per year is Rs 6,000 while the for the tier-2 account, the minimum balance should be Rs 2,000 at the end of each financial year.
From the NPS tier -1 account, the subscriber is not authorised to withdraw the contribution.
For more details on NPS withdrawal, one can read here.4.
Minimum account: In case an NPS subscriber fails to maintain the minimum account, he would have to bear a default panalty of Rs 100 per year of default and the account will become dormant.
To be able to reactivate the account, the subscriber would have to pay the minimum contributions, along with penalty.5.
Pension Fund Manager (PFM): The NPS subscribers have an array of pension funds managers (PFMs) to choose from: These are SBI Pension Funds, LIC Pension Fund, UTI Retirement Solutions, ICICI Prudential Pension Funds Management Company, Kotak Mahindra Pension, Reliance Capital Pension Fund.