Overview of NPS
National Pension System
The National Pension System (NPS) is a pension scheme launched and promoted by the Govt. of India. The scheme allows citizens to undertake retirement planning by investing periodically during their working life and building a corpus for a financially secured retired life. It is a market-linked defined contribution pension scheme.
NPS is regulated by the Pension Fund Regulatory and Development Authority (PFRDA). The scheme is mandatory for Central Government employees (except armed forces) who have joined service and on or after 01 Jan 2004 and for employees of those State Governments who have adopted NPS .
Indian citizens (including NRIs and OCIs) aged between18 and 70 years can open an NPS Account. Corporates (private and public sector) both in the private and public sectors, can introduce NPS as an employee retirement benefit scheme.
Features & Benefits of NPS
Regular pension on retirement
Low-cost pension scheme
Additional tax benefits on investment
Withdrawals for emergencies
Risk spread across asset classes
Portability across jobs and locations
Tax-free withdrawals on exit
Why join NPS early?
How Does NPS Work?
Intermediaries under NPS Ecosystem
Under NPS ecosystem, there are several intermediaries that are authorised by the PFRDA to provide different services related to NPS.
NPS Trust
NPS Trust is the registered owner of all assets under the NPS architecture and its role is to take care of the assets under NPS in the best interest of the subscribers. Pension Funds purchase the securities on behalf of NPS Trust. However, subscribers are the beneficial owners of the NPS assets.
PFM (Pension Fund Manager)
PFMs are responsible for investing and managing NPS contributions received from subscribers. SBI Pension Funds is the largest and the oldest pension fund under NPS, operating since April 2008, and managing all schemes under NPS and also Atal Pension Yojana (APY).
Point of Presence (PoP)
PoPs are authorised entities for the distribution of NPS schemes. They help open new NPS accounts, process subscriber contribution, update subscriber information, and handle grievances. SBI Pension Funds has been operating as an authorised PoP since February 2019.
Central Recordkeeping Agency (CRA)
CRAs are responsible for the centralised recordkeeping and administration, as well as customer service functions for all NPS subscribers.
Currently, there are three CRAs in NPS:
Trustee Bank
Regulator-appointed Trustee Bank provides day to day banking functions related to all NPS transactions in accordance with the guidelines and directions issued by PFRDA.
Custodian
Regulator-appointed Custodian is responsible for the safekeeping of securities held under NPS and APY. It is also responsible for carrying out settlements, recording receipts, maintaining records of securities, and managing custodian accounts of the schemes on behalf of the NPS Trust.
Annuity Service Provider (ASP)
PFRDA empanels IRDAI-registered Indian life insurance companies as ASPs to manage annuity funds and pay pension as per the annuity plan opted by the subscriber upon attainment of superannuation age or exiting NPS.
Pension Projector