Welcome to the
“National Pension System”
NPS – Pension nahi yeh Pran Hai
‘NPS’ - Pension nahi yeh Pran hai
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Agenda
 Understanding NPS…. What is NPS ? How does it work ?
 Why should I invest in NPS ?
 How is it superior to other Retirement Plans ?
 Tax treatment on Contribution, Accretion & Maturity under NPS.
 NPS Report Card – 1. Assets Under Management
2. Fund Performance as on 31/03/2015
NPShai
‘NPS’ - Pension nahi yeh Pran
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About NPS
 NPS is a ‘Government of India’ initiative with an objective of
Development of a sustainable and efficient voluntary defined
contribution Pension System in India. It is regulated by PFRDA.
 NPS provides a platform for savings through three baskets of
Investment Equity (E), Corporate Bonds (C) and Govt. Securities (G)
to create a Retirement Corpus (Pension Wealth), to enable subscriber
for purchasing Annuity post retirement.
 It also allows for withdrawal of up to 60% of the Retirement Corpus
post retirement. The withdrawal can be spread over 10 Years post
Retirement age.
 It is open for all citizens of India (Resident/Non Resident) who are
between 18-60 years of age.
‘NPS’ - Pension nahi yeh Pran hai
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NPS - Architecture
Main Components of the NPS Architecture are :
1.
Points of Presence (PoPs) – The first single contact point. It is the interface
between the subscribers and the NPS Architecture. Responsible for
disseminating all the information about NPS.
2.
Central Recordkeeping Agency (CRA) -( at present NSDL)
3.
Pension Fund Managers – ( at present 8 PFMs)
4.
Custodian (SHCIL)
5.
Trustee Banker (Axis Bank Ltd.)
6.
Annuity Service Providers - (at present 7 annuity providers)
It has an unbundled Architecture. Ownership of the Product does not lie with any single entity
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NPS Architecture
PFRDA
NPS Trust
Trustee Bank
Axis Bank Ltd.
Online
Subscribers
PFMs
CRA
(NSDL)
POP
Custodian
(SHCIL)
Annuity Service
Providers
Information Flow
Fund Flow
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Why should I invest in NPS?

Additional Tax Deduction: Opportunity of Extra Tax Savings under Sec 80 CCD (1B) up to
Rs.50000/- ( This is applicable for investments in NPS only) and is over and above the Sec
80C limit.

Lower Expense Ratio : NPS is perhaps the world’s lowest cost pension scheme. The total
recurring expenses inclusive of the Fund Management fee and all other handling and
administrative charges would work out to be around 0.05% to 0.21% p.a. The Lower
Expense ratio would lead to HIGHER RETIREMENT CORPUS.

Ensures Complete Portability: NPS account can be operated from anywhere in the country
irrespective of employment and geography.

Tax Efficient : The Retirement Corpus used for buying Annuity will be totally Taxfree.

No liquidity before Retirement: Under Normal circumstances, No withdrawal is allowed
before Retirement i.e. 60 Years of age. In a true sense this investment will prove to be the
"REAL BUDHAPE KI LATHI".

Flexibility: Subscribers have - i) Choice of Pension Fund managers (PFMs)
ii) Choice of Investment mix
iii) Choice of Life Cycle Fund is also available
I have a freedom to change the PFM or the Investment Mix once a year without any exit load.
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Popular Retirement Tools……

Public Provident Fund (PPF)

Mutual Fund Pension Schemes

Pension Plans from Insurance Companies

Small Savings Scheme (Post Office Investments)

Other customized Individual Products
Is there any other good option available?
‘NPS’ - Pension nahi yeh Pran hai
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How is it superior to other perceived
Retirement Plans ?
<=== Products ===>
Parametres
NPS
Additional Tax Savings under
Sec 80 CCD (1B) which is
Tax Rebate
beyond the Sec 80 C Limit
Ranges between
Expense Ratio
0.15% to 0.25%
Returns
Asset
Allocation
Liquidity
Market Linked
MF Pension
Products
Insurance
Pension Products
PPF
Postal
Savings
Only under
Sec 80 C Limit
Only under
Sec 80 C Limit
Only under
Sec 80 C Limit
Only under
Sec 80 C Limit
Ranges between
2% to 2.50%
Ranges over 2.50%
Market Linked
Market Linked
Subscribers can customize based
Based on Inestment
Based on Inestment
on their Risk appetite. Also
Objective of the Scheme.
Objective of the
change once a Year without any
Investors can not
Scheme. Investors can
exit load
customize it.
not customize it.
Liquidity available
No liquidity before
Liquidity available
subject to huge exit
Retirement Age
subject to exit load
load
The amount used for purchasing LTCG on Schemes where
Tax Treatment
Annuity - TAXFREE
Equity Component < 65%
The Amount withdrawn as
Taxfree where Equity
on Maturity
lumpsum - TAXABLE
Component >65%
Fund Managers
Can be Changed once a Year
without any exit load
Maturity Amount
TAXFREE
Can not be Changed Can not be Changed
Government
Government
Administered
Administered
Assured (Depends
upon 10 Year G
Assured
SEC current yield)
Government
Administered
Government
Administered
Liquidity not
before 7th Year
Not Available
Maturity Amount
TAXFREE
Maturity Amount
TAXABLE
N/A
N/A
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NPS – Taxability………
Event
Taxability
Contribution in Tier-I
Account
Accretion in Tier-I
Withdrawal from Tier-I
(including accretions)
Additional deduction of Rs.50,000/- under Sec 80 CCD(1B)
available in excess of Rs.1,50,000/- under Sec 80 C
Exempt
1. Amount used to purchase annuity is exempt.
2. Amount withdrawn as lump sum is taxable.
Currently NPS follows E-E-T regime of taxation.
Under DTC it is proposed to be under EEE.
‘NPS’ - Pension nahi yeh Pran hai
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Effect of Lower Expense Ratio on
Retirement Corpus – a comparison
(Assumption : Rs.8000/- being invested Quarterly with assumed gross return of 10% )
Under NPS
Age
20
25
30
35
40
45
50
Investment for
Assumed
Expense
No of Years Gross Return % Ratio %
40
10
0.055
35
10
0.060
30
10
0.070
25
10
0.080
20
10
0.100
15
10
0.135
10
10
0.205
Net
Return %
9.945
9.940
9.930
9.920
9.900
9.865
9.795
Investment
made in total
12,80,000
11,20,000
9,60,000
8,00,000
6,40,000
4,80,000
3,20,000
The %
Retirement
Corpus at 60 Difference
1,64,46,955.36 + 77.04
99,23,439.19
+ 62.19
59,33,225.54
+ 48.92
34,99,334.01
+ 37.35
20,10,659.71
+ 27.16
11,01,406.69
+ 18.35
5,46,186.77
+ 10.82
Under other Investment Schemes (Expense ratio 2% assumed)
Age
20
25
30
35
40
45
50
Investment for
Assumed
Expense
No of Years Gross Return % Ratio %
40
10
2.000
35
10
2.000
30
10
2.000
25
10
2.000
20
10
2.000
15
10
2.000
10
10
2.000
Net
Return %
8.000
8.000
8.000
8.000
8.000
8.000
8.000
Investment
made in total
12,80,000
11,20,000
9,60,000
8,00,000
6,40,000
4,80,000
3,20,000
Retirement
Corpus at 60
92,90,122.04
61,18,558.11
39,84,186.51
25,47,815.61
15,81,179.17
9,30,660.56
4,92,880.18
‘NPS’ - Pension nahi yeh Pran hai
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Effect of Lower Expense Ratio on
Retirement Corpus – a comparison
(Assumption : Rs.8000/- being invested monthly with assumed gross return of 10% )
Under NPS
Age Investment for
No of Years
20
40
25
35
30
30
35
25
40
20
45
15
50
10
Assumed
Gross Return
%
10
10
10
10
10
10
10
Expense
Ratio %
0.055
0.060
0.070
0.080
0.100
0.135
0.205
Net
Return %
9.945
9.940
9.930
9.920
9.900
9.865
9.795
Investment
made in total
38,40,000
33,60,000
28,80,000
24,00,000
19,20,000
14,40,000
9,60,000
Retirement
Corpus at 60
4,40,80,760
2,70,23,703
1,64,09,728
98,22,480
57,23,667
31,76,640
15,94,268
The %
Difference
+69.97
+ 56.65
+ 44.70
+ 34.21
+ 24.94
+ 16.86
+ 9.92
Under Other Investment Schemes (Expense ratio 2% assumed)
Age
20
25
30
35
40
45
50
Investment for
Assumed
Expense
No of Years Gross Return % Ratio %
40
10
2.000
35
10
2.000
30
10
2.000
25
10
2.000
20
10
2.000
15
10
2.000
10
10
2.000
Net
Return %
8.000
8.000
8.000
8.000
8.000
8.000
8.000
Investment
Retirement
made in total Corpus at 60
38,40,000
2,59,34,431
33,60,000
1,72,50,823
28,80,000
1,13,40,906
24,00,000
73,18,715
19,20,000
45,81,280
14,40,000
27,18,228
9,60,000
14,50,266
‘NPS’ - Pension nahi yeh Pran hai
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Starting
Age
Total
Amount
Invested
Assumed
Rate of
Return
Retirement
Corpus at
Age 60
Assumed
Rate of
Return
Retirement
Corpus at
Age 60
Assumed
Rate of
Return
Retirement
Corpus at
Age 60
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346000
10%
8696192
11%
12316624
12%
17452471
19
340000
10%
7899629
11%
11090058
12%
15576563
20
334000
10%
7175481
11%
9985043
12%
13901646
21
328000
10%
6517164
11%
8989534
12%
12406184
22
322000
10%
5918694
11%
8092680
12%
11070950
23
316000
10%
5374632
11%
7284702
12%
9878776
24
310000
10%
4880029
11%
6556795
12%
8814336
25
304000
10%
4430390
11%
5901022
12%
7863943
Starting
Age
Total
Amount
Invested
Assumed
Rate of
Return
Retirement
Corpus at
Age 60
Assumed
Rate of
Return
Retirement
Corpus at
Age 60
Assumed
Rate of
Return
Retirement
Corpus at
Age 60
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4200000
10%
59140070
11%
79806547
12%
108008262
19
4100000
10%
53663699
11%
71797790
12%
96335948
20
4000000
10%
48685181
11%
64582693
12%
85914239
21
3900000
10%
44159256
11%
58082607
12%
76609142
22
3800000
10%
40044778
11%
52226673
12%
68301020
23
3700000
10%
36304343
11%
46951056
12%
60883053
24
3600000
10%
32903949
11%
42198249
12%
54259869
25
3500000
10%
29812681
11%
37916441
12%
48346312
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NPS Report Card
1. Assets Under Management
2. Fund Performance as on 31/03/2015
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Where do we Stand now in terms of AUM?
Total AUM Details as on 31/03/2015
AUM
% of Total
Industry
SBI PENSION FUNDS PRIVATE LIMITED
UTI RETIREMENT SOLUTIONS LIMITED
LIC PENSION FUND LIMITED
ICICI PRUDENTIAL PENSION FUNDS MGMENT COMPANY LTD
KOTAK MAHINDRA PENSION FUND LIMITED
RELIANCE CAPITAL PENSION FUND LIMITED
HDFC PENSION MANAGEMENT COMPANY LIMITED
31407.09
24831.45
24010.13
369.00
107.47
76.97
53.08
38.84
30.71
29.70
0.46
0.13
0.10
0.07
Grand Total
80855.19
100.00
Pension Fund Manager
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Incentive Scenario for IFAs…….
 Rs.75/- per Application
 Up front commission of 0.15% of the amount mobilised i.e. on each
instalment
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Annuity Service Providers
 Subscribers of the National Pension System (NPS) would have a choice to select Annuity Service Providers,
and annuity schemes offered by them at the time of exit from NPS.

Pension Fund Regulatory and Development Authority (PFRDA) has at present empaneled the following
Seven IRDA approved life insurance companies for providing annuity services to the subscribers of National
Pension System (NPS).
1. Life Insurance Corporation of India
4. Bajaj Allianz Life Insurance Co. Ltd
2. SBI Life Insurance Co. Ltd.
5. Star Union Dai-ichi Life Insurance Co. Ltd.
3. ICICI Prudential Life Insurance Co. Ltd.
6. Reliance Life Insurance Co. Ltd.
4.
7. HDFC Standard Life Insurance Co. Ltd.
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Types of Annuity available:
•
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 you are
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.
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Low Expense Ratio
Charges under NPS
Intermediary
Charge Head
Service Charge
Initial Subscriber Registration (One Time)
Rs. 100/-
Initial Contribution
PoP
All Subsequent Contributions
0.25% of the amount
mobilised
Minimum: Rs.20/- &
Maximum: Rs.25000/-
Any Non Financial Transaction
Rs.20/- per Transaction
PRA Opening (One Time)
Rs.50/-
PRA Maintanance (Per Annum)
Rs.190/-
Per Transaction (Financial/Non Financial)
Rs.4/-
Custodian
Asset Servicing (Per Annum)
0.0075%
PFM
Investment Management Fee
0.01 % per Annum
CRA
Method of
Deduction
To be collected
upfront
Through NAV
Cancellation/
Deduction
The overall expense ratio (PoP Charges + CRA Charges+ PFM Charges+ Custodian Charges) will
range from 0.05% to 0.21% depending on the subscriber’s entry age from 18 to 50 Years
‘NPS’ - Pension nahi yeh Pran hai
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Important ….
 Any person above the age of 18 irrespective of nature of employment or profession
can open an NPS account.
 NPS is flexible and portable i.e the NPS account opened once can be used
anywhere across India even when you change your job, profession, Location etc.
 NPS is independent of other retirement plans/investments. Any person with or
without existing retirement plans/investments like EPF/PF, PPF, Insurance Policies,
Mutual Funds, Bank Deposits etc can open NPS account and plan the retirement
better.
 NPS investments can be customised (within the specified asset class and limits) as
per individual need and can be changed once a year.
 NPS also provides an Auto Choice Option for investment where investments in
asset classes of Equity, Corporate debt and Gsec gets realigned based on persons
age.
Opening an account in NPS is the first step for securing ones Sunset Years
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Disclaimer :





The Illustration and figures given in the presentation are only for
understanding purpose and based on assumptions mentioned in each
illustration.
Investments in the scheme are subject to the risk involved with various asset
class.
Past performance may or may not be sustained in future. Nothing contained
herein shall amount to the PFM having assured any minimum rate of return on
the investment.
All investment in Pension Funds and securities are subject to market risks and
the NAV of the funds may go up or down depending on the factors and forces
affecting the securities market.
For complete information of NPS please refer to the Offer document and/or log
on to PFRDA website www.pfrda.org.
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Details of Tax Deductions as per
Budget Memorandum 2015
 Deduction u/s 80C
 Deduction u/s 80CCD (1B) - (Only NPS)
 Deduction on account of interest
Rs. 1,50,000
Rs. 50,000
on house property loan (Self occupied property) Rs. 2,00,000
 Deduction u/s 80D on health
insurance premium
Rs. 25,000
 Exemption of transport allowance
Rs. 19,200
Total
Rs. 4,44,200
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