The New Pension Scheme (NPS) is a social security scheme introduced by the government, aimed at providing a steady stream of income post retirement. An affordable option, the NPS is especially ideal for people from the unorganized sector, or for those who do not have the benefit of receiving pension from their employers. So how should one go about opening an NPS account? Who should one approach and what are the documents required? Read on to know it all.
Getting Started- Understanding the NPS
The NPS follows a very simple working mechanism. Investors contribute a monthly amount towards their NPS account. This monthly contribution is in turn invested in avenues as per investor choice and risk profile. Upon retirement, a part of the corpus could be withdrawn as lump sum, and the balance will be mandatorily paid out as pension annuity.
There are two NPS account options available for investors.
Tier 1: This is a mandatory non-withdraw able pension account. Money would be available on maturity only, i.e., at 60 years.
Tier 2: A voluntary withdraw able account, it lets you withdraw money at any time. However this option will not have any government contribution. Also, it is mandatory to have a Tier 1 account in order to open a Tier 2 account.
Opening an Account- Whom Do You Approach?
The NPS is regulated by the Pension Fund Regulatory Development Authority (PFRDA). Six designated Pension Fund Managers (PFMs) have been appointed who would be responsible for investing the funds and generating returns from them. An investor would have the liberty to choose or change their fund manager if so required.
List of Pension Fund Managers
· ICICI Prudential Life Insurance Company Limited
· IDFC Asset Management Asset Management Company Limited
· Kotak Mahindra Asset Management Company Limited
· Reliance Capital Asset Management Company Limited
· SBI Pension Funds Limited
· UTI Retirement Solutions Limited
Various Points of Presence have been constituted, which act as a customer interface for investors. You may chose from the below mentioned list to open your account.
List of Points of Presence (PoP)*
· Allahabad Bank
· Axis Bank Ltd.
· Bajaj Allianz General Insurance Co Ltd.
· Central Bank of India Citibank N.A.
· Computer Age Management Services Private Ltd.
· ICICI Bank Ltd.
· IDBI Bank Ltd.
· IL&FS Securities Services Ltd.
· Kotak Mahindra Bank Ltd.
· Life Insurance Corporation of India Oriental Bank of Commerce Reliance Capital Ltd.
· State Bank of Bikaner & Jaipur State Bank of Hyderabad
· State Bank of India
· State Bank of Indore
· State Bank of Mysore
· State Bank of Patiala
· State Bank of Travancore
· The South Indian Bank Ltd.
· Union Bank of India
· UTI Asset Management Company Ltd.
*For a more complete list of POP and their branches, click https://www.npscra.nsdl.co.in/pop-sp.php
Alternatively, NPS accounts could also be opened online through CAMS online, or providers such as ICICI Direct.
Permanent Retirement Account Number (PRAN)
The Permanent Retirement Account Number (PRAN) is a unique identification number that is issued on opening an NPS account. It is a 16 digit number that would remain fixed throughout the term of the account, irrespective of changes in job, location of account, or change in pension fund manager.
Account opening Procedure
A NPS account could be opened by any Resident Ior Non Resident Indian, aged between 18 to 55 years. You would need to visit the nearest POP branch to open the account.
- To register for a NPS account, you would need to fill up the prescribed application form and submit the necessary Know Your Customer (KYC) documents. Documents required are Identity Proof, Address Proof, Date of Birth Proof, and Two Recent Color Photographs.
- On the application form, you would need to provide the preferred scheme, and asset allocation choice. The NPS caps the equity allocation at 50%.
- An initial contribution is collected at the time of opening of account. This contribution is a minimum of Rs.500/‐ for Tier 1 and for Tier‐II it is a minimum of Rs.1000/‐
- Once the account is opened, Central Recordkeeping Agency (CRA) of the NSDL would send a Permanent Retirement Account Number (PRAN), an information brochure, the internet pin and telephone pin, within 15 days. In case of any queries or delay regarding application form, Investors could view it’s status by using the acknowledgement number on www.npscra.nsdl.co.in.
The NPS account is a good option for those who wish to have a steady stream of income post retirement. The scheme is in its early years, and though sometimes the procedures may seem a bit cumbersome, investors have the facility of an I‐Pin, T‐Pin with an Interactive Voice Response system, making it easier to access details about their account.