New Pension System - An Overview

New Pension System- An Overview

Introduction-

To facilitate the senior citizens, the Central Government has launched a new pension scheme named “New Pension System- Pension Nehi Yeh PRAN Hain”. It is promoted by Pension Fund Regulatory and Development Authority (PFRDA) to encourage awareness among the people by establishing and regulating pension funds to protect their future. It is also known as National Pension Scheme (NPS). 

What is it?
The NPS is a kind of contributory pension scheme under which contributions from the subscribers are collected and accumulated in a single pension account by the Govt. as an employer. At first, NPS became mandatory for all the Central Govt. employees except Armed Forces. Later the Govt. of various states has adopted the scheme for the employees.  A subscriber of NPS must be provided an individual pension account along with the unique Permanent Retirement Account Number (PRAN). They must be provided a portable card consisting of the PRAN and other information for accessing the pension account from anywhere in India. 

NPS- Lite-
The NPS was launched mainly for the Govt. employees. Later the facility of the scheme is availed by every citizen of India. To provide the income security to the people with marginal income from the economically poor sections of society, the NPS-Lite scheme is launched. It is the result of joint collaboration of PFRDA and Govt. of India. Under NPS- Lite, minimum amount of pension of Rs. 1000 per month must be provided by the Govt. 

Benefits of the Scheme-

• Tax Benefit
• Safety of the Money
• Minimum Deposit amounts and facility of compounding.
• Portability
• Transparency

Features of the Scheme-

• Under NPS, there are two types of accounts i.e. Tier I and Tier II.
• In case of Tier I account, the subscribers can contribute their savings for the retirement into the non- withdrawal account till 60 years. They can draw pension for rest of the lives. Rs. 500 must be contributed to open the account.  Minimum balance in the accounts should be Rs. 6000 at the end of a financial year. The subscribers can not exit before 60 years.
• On other hand the Tier II account is the “voluntary savings account” in which the subscriber(s) can freely withdraw the savings as per their wish. The active Tier I account must be the per-requisite to open the Tier II account. There is no limit on the number of the withdrawals.
• The subscribers must contribute minimum Rs. 100 per month. No fixed amount of monthly contribution is there. The Contribution may be made whenever the subscribers are comfortable and have the essential disposable income. Rs. 1000 must be deposited at the time of opening an account.
• In case of combined account opening of Tier I and Tier II, Rs 1500 must be contributed.
• The Money must be collected by the organizations named as “Aggregators”, who are approved by PFRDA to perform the task. 
• The subscriber may choose the fund manager from the banks i.e. SBI, UTI, ICICI, Reliance, Kotak Mahindra and IDFC.
• The subscriber can withdraw 60% of the pension amount in lump sum and minimum 40% of the amount must be annuitized. If he exits before 60 years, it requires a minimum annuitization of 80% of the pension wealth. This minimum amount of pension sealing must be revised after a certain time.
• If the subscriber dies, the heirs can withdraw the money immediately.