The number of subscribers under various schemes of the National Pension System (NPS) jumped 22.88 per cent year-on-year to 6.25 crore as of March 4 this year, compared with 5.08 crore a year ago. The total pension assets under management (AUM) as on March 4, 2023, stood at Rs 8.82 lakh crore, showing a y-o-y growth of 23.45 per cent.
Under the NPS, central government scheme saw 4.8 per cent growth in subscribers between March 4, 2023, and March 5, 2022, accounts under state government saw a 9.39 per cent rise, corporate (20.19 per cent), all-citizen model (32.02 per cent), and Atal Pension Yojana (28.46 per cent), according to the latest data from the finance ministry.
What is NPS?
The NPS, or the National Pension System, is a government-sponsored retirement saving option where individuals can contribute a monthly amount to withdraw regular income after retirement. It was launched in January 2004 for government employees. Later, in 2009, it was opened to all sections. The NPS is a pension-cum-investment scheme launched by the government to provide old-age security to citizens of India. It brings an attractive long-term saving avenue to effectively plan your retirement through safe and regulated market-based returns.
Types of NPS Accounts
Under the NPS, there are two types of accounts — Tier 1 and Tier 2. Tier 1 account is mainly meant for retirement savings where one has to make a minimum contribution of Rs 500 while opening the account. It also entails tax benefits under Section 80CCD (1B) of the Income Tax Act, 1961.
NPS Tier 2 is an open-access account. It requires a minimum investment of Rs 1,000, where the subscriber is free to withdraw his/ her entire corpus at any point in time. No tax benefits are available in this account.
Various Schemes Under the NPS
There are four asset classes under the NPS — equity (E), corporate debt (C), government bonds (G) and alternative investment (scheme A). Schemes under each of the classes has two tiers. In the NPS, there are multiple pension fund managers and investment options. The subscriber first selects the fund manager, and then he/she has an option to select any one of the investment options.
What Is The NPS Ratings System?
The ratings system will help subscribers have a better idea of the risk involved in their investments under the NPS. They will be able to take a better decision on the allocation of investment to various asset classes schemes at the time of enrolment into the scheme and at the time of making subsequent contributions to the schemes.
The rules mandate six levels of risk — Low Risk, Low to Moderate Risk, Moderate Risk, Moderately High Risk, High Risk, and Very High Risk. Based on the scheme characteristics, pension funds shall assign risk levels for the Schemes E-Tier 1, E-Tier 2, C-Tier 1, C-Tier -2, G-Tier-1, G- Tier-2 and Scheme A, according to the circular.
New NPS Rule From April 1
The PFRDA has asked the subscribers and the associated nodal officers/POPs/corporate to ensure that documents are uploaded to the respective Central Record Keeping Agency (CRA) user interface. They will also have to ensure that the uploaded documents are legible. The documents are NPS Exit/ Withdrawal Form, Proof of Identity and Address as specified in the Withdrawal form, bank account proof, and Copy of PAN card.
The move is aimed at making annuity payments faster and simpler after exiting the NPS.
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