NAV as on 16-Jul-2019 : LIC Pension Fund Scheme Central Govt.- 29.5112     LIC Pension Fund SG Scheme State Govt. -26.3611     NPS LITE -Govt.pattern-24.4535     LIC Pension Fund Scheme Corporate CG-19.5667    LIC PENSION FUND SCHEME E - TIER I- 19.2718    LIC PENSION FUND SCHEME C - TIER I- 18.2259    LIC PENSION FUND SCHEME G - TIER I-20.2753    LIC PENSION FUND SCHEME A - TIER I-12.367    LIC PENSION FUND SCHEME E - TIER II- 16.0919    LIC PENSION FUND SCHEME C - TIER II -16.9923     LIC PENSION FUND SCHEME G - TIER II-20.5467    LIC PENSION FUND SCHEME A - TIER II-10    LIC PENSION FUND ATAL PENSION YOJANA SCHEME- 15.0187    
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National Pension System (NPS) :
Pension reform is a major initiative undertaken by the Government of India to provide income security after retirement. The NPS for Govt. employees has been operationalised in 2007- 2008, with the appointment of Pension Fund Manager (PFM), Central Recordkeeping Agency (CRA) and other entities. New Pension System has been made available to all citizens of India from 1st May, 2009.

NPS is a low cost portable Pension System having unique Permanent Retirement Account Number (PRAN) for each subscriber. There are multiple Fund Managers and multiple investment options. There is also provision for mandatory annuitization at the time of exit.

Scheme for Govt employees :

Entry :

 For Government Employees : National Pension System (NPS) has been introduced by the Central Government on 01 January 2004 and is being regulated by Pension Fund Regulatory and Development Authority (PFRDA). This scheme has already been made mandatory for Central Government employees who joined their service on or after 01/01/2004 (except the armed forces). Most of the state governments have also joined NPS for their employees, who joined their service on or after 1st January 2004.

The NPS is a two tier Defined Contribution Pension System.

Tier I : Mandatory non-withdrawable Pension Account mandatory for Central Government employees who have joined services on or after 1st January 2004. The employees will Contribute 10% of basic salary & DA and matching 10% will be contributed by the Government to Tier-I Pension account of the employee.

Tier–II : Voluntary withdrawable Savings Account. No contribution will be made by the Government under the Tier-II account for the employees who have joined NPS.

Contribution :
Central Government employees who have joined services on or after 1st January 2004 will Contribute 10% of salary & DA and matching contribution by government.
Individuals can normally exit at or after age 60 years from the pension system. At exit, the individual would be required to invest at least 40 percent of pension wealth to purchase an annuity. In case of Government employees, the annuity should provide for pension for the lifetime of the employee and his dependent parents and his spouse at the time of retirement. The individual would receive a lump-sum of the remaining pension wealth, which subscriber would be free to utilize in any manner. Individuals would have the flexibility to leave the pension system prior to age 60. However, in this case, the mandatory annuitisation would be 80% of the pension wealth.

Mandatory Annuitization :

Under the NPS, an employee will be entitled to exit only at the time of retirement at the age of 60, however at least 40 per cent Pension wealth would be used for purchasing annuity from a life insurance company approved by the IRDA.

All-citizens and scheme for corporate subscribers:
National Pension System has been made available to all citizens of India from 1st May, 2009. Subscriber can be resident or non-resident Indian. The subscriber age should be between 18 and 65 years on the date of application. Minimum contribution per instalment is Rs 500 and minimum contribution per year is Rs 1000, with atleast 1 contribution per year.

Mandatory Annuitization :

For All Citizens : The normal retirement age has been fixed at 60 years. At 60, the subscriber will be required to use at least 40 per cent of accumulated savings to buy a life annuity from an insurance company. However, the subscriber has the option to defer the lump sum withdrawal till the age of 70 years. Subscriber has also got the option to continue contributing upto the age of 70 years. This option is required to be exercised upto 15 days prior to completion of 60 years.

For those looking to exit before turning 60, there is an option to withdraw 20 per cent of the accumulated savings but to buy an annuity with the remaining 80 per cent.

If the subscriber dies before he or she turns 60, the nominee can receive the entire pension corpus.

PRAN : Under the new pension system, Central Record Keeping Agency (CRA) will be required to maintain subscriber accounts and issue a unique Permanent Retirement Account Number (PRAN) to each subscriber.

Portability : Under NPS, employee’s pension account is portable. The same account and PRAN continues even when subscriber switches jobs or schemes or fund managers. Investors have the flexibility to choose between fund managers.

Multiple Funds : NPS envisages multiple pension fund schemes with different weightages of Asset Classes.

Entities under NPS Architecture :

NPS is a well-structured Defined Contribution Pension system with defined role of various entities.

Operationalisation of National Pension System (NPS)

For Government Employees : NPS has been introduced by the Central Government on 01 January 2004 and is being regulated by Pension Fund Regulatory and Development Authority (PFRDA). The NPS for Government employees has been operationalised in 2007-08 with the appointment of three (3) Sponsors (LIC, SBI Mutual Fund and UTI Mutual Fund) to manage the funds of NPS & Central Recordkeeping Agency (CRA) and the sponsor entities in turn has formed separate companies for managing the funds of NPS. LIC Pension Fund was sponsored by LIC of India, SBI Pension Fund was sponsored by SBI and UTI Retirement Solutions (P) Ltd has been sponsored by UTI Mutual Fund.

for All Citizens :NPS has been made available to all citizens of India from 1st May, 2009. Eight Pension Fund Managers including LIC Pension Fund have been appointed to manage the fund under NPS for all citizens. Any citizen of India desiring to open an NPS account can contact any of the Points of Presence (POPs) appointed by PFRDA or through eNPS.

Investment Options:

For Govt. Employees:

NPS funds are invested by the Pension Fund Managers in prescribed asset class as per following investment pattern wef 01.04.2019 :
Govt. Securities & related investments Upto a maximum of 55%
Debt Instruments & related investments Upto a maximum of 45%
Equity & related investments Upto a maximum of 15%
Asset Backed, Trust Structured and Misc. Investments Upto a maximum of 5%
Short-term Debt Instruments & related investment Upto a maximum of 10%

For All Citizens :Under the investment guidelines finalized for the NPS, pension fund managers will manage four separate schemes, each investing in a different asset class. The four asset classes are equity, government securities, credit risk-bearing fixed income instruments and alternate investments.
A subscriber opening an account with NPS with any one of the POPs or through eNPS is provided a Permanent Retirement Account Number (PRAN), which is a unique number and it remains with the subscriber throughout his lifetime.  The scheme is structured into two tiers:

Tier-I account : This is the non-withdrawable permanent retirement account into which the accumulations are deposited and invested as per the option of the subscriber

Tier-II account : This is a voluntary withdrawable account which is allowed only when there is an active Tier I account in the name of the subscriber.  The withdrawals are permitted from this account as per the needs of the subscriber as and when claimed. However, the tax benefits are not at par with Tier I account.
Investment options available are explained HERE

Fund Management and other charges:

NPS is the least cost pension system in India and probably in the world. Nowhere the fund management charge is so low, which has been determined through competitive bidding in a very transparent manner. The fund management fee is 0.01% p.a. under NPS all-Citizens scheme.

Tax Treatment:

Tax benefit to employee:
Individuals who are employed and contributing to NPS would enjoy tax benefits on their own contributions as well as their employer’s contribution as under:-

(a) Employee’s own contribution - Eligible for tax deduction up to 10% of Salary (Basic + DA) under Section 80 CCD(1) within the overall ceiling of Rs. 1.50 lakh under Sec 80CCE.

(b) Employer’s contribution – The employee is eligible for tax deduction up to 10% of Salary (Basic + DA) contributed by employer under Sec 80CCD(2) over and above the limit of Rs. 1.50 lakh provided under Sec 80CCE.

Tax benefit for self-employed:

Eligible for tax deduction up to 10% of gross income under Sec 80CCD(1) within the overall ceiling of Rs. 1.50 lakh under Sec 80CCE.

Subscriber is allowed deduction in addition to the deduction allowed under Sec. 80CCD(1) for  additional contribution in his NPS account  subject to maximum investment  of  Rs. 50,000/- under sec. 80CCD1(B)

Partial Withdrawal
Partial Withdrawal is allowed to the subscriber subject to subscriber fulfilling the following conditions and withdrawal can happen only against specified reasons:
  • Subscriber should be in NPS for 10 years
  • Amount should not exceed 25% of the contributions made by the subscriber

  • Purposes for which partial withdrawal allowed
  • - For the purpose of higher education of his/her children,
  • - For marriage of his/her children,
  • - For purchase or construction of residential house or flat
  • - For treatment of specified illnesses.

  • Frequency of partial withdrawal
  • - Maximum 3 (three) times during entire tenure,
  • - Minimum 5 (five) years gap between consecutive withdrawals

  • Types of Annuity:

    The subscriber can purchase an annuity from any one of the PFRDA empanelled annuity service providers as per his choice or selection of the annuity type. Currently, the Indian life insurers who act as Annuity Service Providers(ASP) provide the following type of annuities in India :
    Pension (Annuity) payable for life at a uniform rate to the annuitant only.
    Pension (Annuity) payable for 5, 10, 15 or 20 years certain and thereafter as long as the subscriber is alive.
    Pension (Annuity) for life with return of purchase price on death of the annuitant (Policyholder).
    Pension (Annuity) payable for life increasing at a simple rate of 3% p.a.
    Pension (Annuity) for life with a provision of 50% of the annuity payable to spouse during his/her lifetime on death of the annuitant.
    Pension (Annuity) for life with a provision of 100% of the annuity payable to spouse during his/her lifetime on death of the annuitant.
    Pension (Annuity) for life with a provision of 100% of the annuity payable to spouse during his/her lifetime on death of the annuitant and with return of purchase price on death of the spouse. If the spouse predeceases the annuitant, payment of annuity will cease after the death of the annuitant and purchase price is paid to the nominee.

    NPS is different from other pension schemes:

  • NPS is a technology driven low cost, highly transparent pension system.

  • Entire system of NPS is technology driven and all the entities of NPS interconnected.

  • Selection of Fund Managers, CRA, POPs were done under highly transparent manner through competitive bidding.

  • Regulation of Asset Allocation aimed at reducing the risk content in the funds by keeping capped equity exposure.

  • Mandatory Annuitization ensures that retirement savings provide regular flow of post retirement income.

  • Pay-out is very flexible having in built provision of Mandatory annuity, Lump sum Withdrawal, Phase Withdrawal (for All Citizens Scheme).
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