PPT on NPS_Ms.fjnrufnunuvnvurnuvnunruivn.pdf

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1. Financial Planning and NPS
29thApril,2024, PFRDA, New Delhi

2. What is Financial Planning & what are its
different stages
•Long term strategy
•Intelligent managing of money
•To accomplish your goals and objectives
•Agnostic of ups and downs
•Stage-1 –Emergency fund and goal defining
•Stage 2-Start saving now
•Stage3-Planned investments to beat inflation
•Stage 4-Diversify investments and periodic revisiting .

3. Are you a part of this Cohort?
•You are clear about your life goals
•You have fair idea of what are the investment products in the market
•You know that FDs and Insurance policies are not all in investments.
•You are aware that the due to inflation your purchasing power will be much less 40 yrshence with the same amount.
•You know the key to beat inflation is to invest regularly.
•You know the right technology whereby you can invest.
•You know that you have to invest in upskilling yourself, in gaining experiences and qualification , to remain relevant .
•You want to develop your hobbies and invest in self development to remain happy.

4. Are you also careful about the following ?
•Refraining from unhealthy financial habits
•Overspending from credit cards
•Succumbing to unwarranted loans
•Not caring about your credit score
•Taking unwarranted risks in investments
•Experimenting with your money
•Living only for today while tomorrow will take care of itself
•Investing haphazardly
•Following apps and informal advice for investing

5. Do you want to opt for F.I.R.E ?
•Fire is Financial Independence and Retire Early
•This is for life beyond 9 to 5
•Requires aggressive investment, meticulous budgeting , savings and investment strategy.
•Objective would be to live with dignity post retirement
•You can be a saver or an investor
•Saver would save part of her salary and save as per accessibility, transparency and convenience
•Investor would assess risks, identify asset classes, change her mix and consider liquidity , cost efficiency and governance.

6. Bucket strategy in investments
•Different buckets for S.T , Med. T and L.T
•S.T.-1-3 yrs, M.T-4-7 years and L.T beyond 7 years
•L.T. goals could be a bungalow, lifestyle, travelling , hobbies ,
donations etc.
•Also important to consider are surprise expenses such as medical
emergency , home medical assistance and increase in Life expectancy.
•Life expectancy in India 70.42 yrs( male 69.5 yrs, female-72.2 yrs)
•US-76.33 yrs, China-78.21 yrs, East Asian countries-81-87 yrs
•NPS provides inbuilt strategies with flexibilities for investments.

7. Social
Security
Schemes
of Govt.
Atal Pension Yojana, PM
ShramYogi Maan-dhan
Yojana, PM Karam Yogi
Maan-dhanYojana, PM
Kisan Maan Dhan Yojana
National Social
Assistance
Programme of
Govt.
Civil
Service
Pension
Public
Provident
Fund
Special
Provident
Funds
(Statutory)Employees’
Provident Fund
& Pension
Scheme
Pension/
Annuity Plans
of Life
Insurance Co.
National
Pension
System
Retirement
Plans of
Mutual
Funds
Approved
Superannuation
Funds &
Recognised
Provident
Funds
Regulated
by EPFO
Regulated
by IRDAI
Regulated
by PFRDA
Regulated
by SEBIDefined Benefit Pension
discontinued and
replaced by NPS
Approved by Commissioner of Income Tax
Pension Scenario
-INDIA
For Coal Miners, Seamen,
Assam Tea Plantations
IndiraGandhiNationalOld
AgePensionScheme,Indira
GandhiNationalWidowPensionScheme,Indira
GandhiNationalDisabilityPensionScheme,National
FamilyBenefitSchemeandAnnapurna0
3
2
2
3
2, 3
3
3
1
3

8. DB Vs DC system
•Inadefinedbenefit(DB)pensionscheme,thebenefitformula
determinesthelevelofbenefitstotheindividuals.Thisdepends
onthenumberofyearsofserviceandwagehistory.
•ThepensionbenefitsunderDCschemedependsonthe
contributionofemployer,employeeandreturnsgeneratedonit.
•TheDBschemeissimpleinadministeringwhereasDCschemes
arecomplexinnatureandprofessionaladministrationis
recommended.
•IncomparisonwithDB,aDCschemeoffersmoreflexibleand
portableretirementbenefitstotheparticipants.
•TheDBschemecanprovideasecureandpredictablesourceof
revenuetothepensioners,whiletheemployerbearstherisk.
8

9. 9
•From2000to2007,amarkedshiftinpensionpolicyinIndiawaswitnessedwhichculminatedinintroductionofanewpensionsystem.
•AHighlevelExpertGroup(HLEG)andtheOldAgeSocialandIncomeSecurity(OASIS)ProjectcommissionedbytheGovernmentwerethetwoinitialmilestonestotheroadtopensionreformsfortheGovernmentemployeesandtheunorganizedsectorrespectively.
•Theseeffortsculminated
üinsettingupofthePensionFundRegulatoryandDevelopmentAuthority(October2003),
üintroductionofaNewPensionSystem(December2003),andintroductionofthePFRDABillinParliament.(Billnotifiedin2014).
üAccordingly,theNewPensionSystem(NPS)wasintroducedfromJanuary1,2004forCentralGovernmentemployeesrecruitedonorafterthatdate.
üNPSextendedtoallcitizensin2009,NPSLitein2010,NPSforCorporatesin2011
üAPYlaunchedin2015
üAson31stMarch-TotalAUM-11,37,003.00crore,Subscribers-7.35crore(1.80crinNPSand5.55crinAPY)
Pre-reform work –Outcome

10. Silent Features of National Pension System
•Wellregulated:Transparentinvestmentnorms,regularmonitoringandperiodicperformancereviewof
FundManagersbyNPSTrustandPFRDA.
•LowCost:NPSisoneoftheworld’slowestcostpensionscheme.
•Portability:NPSaccountcanbeoperatedfromanywhereinthecountryirrespectiveofemploymentand
geographythusensuringportabilityofbenefits.
•Flexibility:Co-contributionbyemployee&employer,ChoiceofPOP,PFsandinvestmentmixormay
selectAutoOption(lifecyclefund);AnnuityServiceProvider,combinationoflumpsumandperiodic
income.
•PrudentInvestments:InNPSinvestmentsaremadebyprofessionalPFs,aspertheprescribedinvestment
guidelinesindifferentassetclasse.g.E,C&Gtoensureoptimalreturns.
•PowerofCompounding:Throughlongtermaccumulationoffund.
•SimpleandWebenabled/Online:AlltransactionscanbetrackedonlinethroughCRAsystem.Employee
cancheckfundandcontributionstatusonline.
10

11. PFRDA
(Regulator)
Nodal Office/ Point of Presence
(Distribution Channel)Central Recordkeeping Agency
(Database)
Trustee Bank
(Banker for the
system)
Pension Funds
(Investment Management)
Custodian
(Securities Safekeeping)
Annuity Service Provider
(Provides Annuity)
NPS Trust
(Holds Assets)
Specialized Functions
Registration
Entity Expertise
Performance/Compliance
Regulations
NPS Architecture

12. .
ChoiceGovt SectorAll CitizenCorporate
CRAEmployer
Subscriber
(depends on PoP
integration with CRA)
Employer
(depends on PoPintegration
with CRA)
Point of PresenceNA -(Nodal Office)Subscriber Employer
Pension Funds-Default (03 Pension Funds)
-Subscriber (Any 01 out of 07)
Subscriber
(Any one -out of 07)
-Employer or
-Employer can delegate
the option to subscriber
Investment Choice-Default
-Subscriber (limited choice)
Subscriber
(Auto / Active)
-Employer or
-Employer can delegate
the option to subscriber
Annuity Service
ProviderSubscriber (Any one -out of 14)
Annuity PlanSubscriber (Any one available plan)
Selection of Options/Choices

13. Tier-I
§Pension Account
§Tax benefits
§Conditional partial withdrawal
§Opening Rs500
§Annual Contribution Rs1000
§No limits on Contributions
Tier–II
§Optional Account with Tier-I
§No tax benefits
§Unrestricted withdrawals
§Opening Rs1000
§Min. Contribution Rs250
§No limits on Contributions

14. OwncontributionseligiblefortaxdeductionunderSec80CCD(1)upto10%of
basic+DAorupto20%ofGrossIncomeforselfemployedwithintheoverall
ceilingofRs.1.50LacsunderSec.80CCE.
AdditionaldeductionalloweduptoRs.50,000/-underSec.80CCD1(B).
Amountutilizedforpurchaseofannuityonexit(minimum40%mandatory)isnot
treatedasincome.
GoodsandServiceTax(currently1.8%)isnotapplicableonannuitypurchase.
Maximum60%ofthetotalcorpusatthetimeofexitisnottreatedasincome.
PartialWithdrawalsaretax-exempt
Tax benefits
Tax Implications on Exit
Exclusively
available
under NPS
Tax Benefits and Implications
Contributions made by the employer (upto10% (14%) of Basic + DA)
§Allowed as a business expense under Section 36 (1) iv (a) of Income Tax Act 1961.
§Employee gets tax deduction under section 80 CCD (2) of IT in addition to the tax benefits available
under Sec. 80 CCE, up to Rs. 7.5 lacs.

15. JOIN
OnlinePhysical
ENTRY
CriteriaGovernmentAll CitizenCorporate
EnrollmentMandatory #VoluntaryVoluntary
Age Employee18-7018-70
Initial ContributionNARs500NA
InterfaceNodal OfficePoP/eNPSPoP/Employer
FormsSRF-GovtSRF-PrivateSRF-Private
Employer TaggingNodalOffice Authorization/
Salary uploadNAEmployer
Authorisation

16. 1
Age
Aggressive Life Cycle Fund (LC-75)Moderate Life Cycle Fund (LC-50)Conservative Life Cycle Fund (LC-25)
Asset Class (in %)Asset Class ( in %)Asset Class (in %)
ECGECGECG
Up to 35 years751015503020254530
36 years711118482923244333
37 years671221462826234136
38 years631324442729223939
39 years591427422632213742
40 years551530402535203545
41 years511633382438193348
42 years471736362341183151
43 years431839342244172954
44 years391942322147162757
45 years352045302050152560
46 years322048281953142363
47 years292051261856132166
48 years262054241759121969
49 years232057221662111772
50 years202060201565101575
51 years19186318146891378
52 years18166616137181181
53 years1714691412747984
54 years1612721211776787
55 years1510751010805590
Auto Choice Asset Allocation

17. .
ChoiceGovt SectorAll CitizenCorporate
CRAEmployer
Subscriber
(depends on PoP
integration with CRA)
Employer
(depends on PoPintegration
with CRA)
Point of PresenceNA -(Nodal Office)Subscriber Employer
Pension Funds-Default (03 Pension Funds)
-Subscriber (Any 01 out of 07)
Subscriber
(Any one -out of 07)
-Employer or
-Employer can delegate
the option to subscriber
Investment Choice-Default
-Subscriber (limited choice)
Subscriber
(Auto / Active)
-Employer or
-Employer can delegate
the option to subscriber
Annuity Service
ProviderSubscriber (Any one -out of 14)
Annuity PlanSubscriber (Any one available plan)
Selection of Options/Choices

18. CHOICES -OPTIONS
Recordkeeping AgencyPension Funds
Can be changed once in a year

19. Active Choice
Asset ClassCap on Investment
Equity (E)75%
Corporate Bonds (C)100%
Government Securities (G)100%
Alternate Investments(A)5%
Aggressive Life Cycle FundLC-75
Moderate Life Cycle Fund LC-50
Conservative Life Cycle FundLC-25
Auto Choice
LC -75LC - 50LC - 25
75
50
25
10
30
45
152030G-Sec
C-Bond
Equity
vPension Fund can be
changed once in a
financial year
vInvestment Option can
be changed four (04)
times in a financial year

20. ParticularsExposure
Limits
Government Securities &
State DevelopmentLoansUpto65%
Corporate Debt Upto45%
Short term debt instrumentsUpto10%
EquityUpto15%
Asset backed securitiesUpto5%
DateSBIUTILIC
April 1, 200855405
May 1, 2009403129
July 22, 2010333235
July 01, 201132.503433.50
May 1, 2012343234
May 15, 2013343333
Jun 25, 2015343333
Nov 10, 20163533.5031.50
Nov 6, 2017333433
May 7, 201833.5034.5032
May 9,2019343333
Asset Allocation –Govt. Sector
Wef.1stApril2019,CentralGovt.
employeescanexercisechoiceof:-
-PensionFunds
-AssetAllocation

21. Atal Pension Yojana vs National Pension System

22. ANNUITY SERVICE PROVIDERS

23. •forlifeatauniformratetotheannuitantonly.
•for5,10,15or20yearscertainandthereaftertilltheannuitantisalive.
•forlifeataincreasingsimpleinterestrateof3%p.a.
•forlifewithaprovisionof50%oftheannuitytospouseupondeathoftheannuitant.
•forlifewithaprovisionof100%oftheannuitytospouseupondeathoftheannuitant.
•forlifewithreturnofpurchasepriceondeathoftheannuitant.
•forlifewithaprovisionof100%oftheannuitypayabletospouseupondeathoftheannuitant
andreturnofpurchasepricetonomineeondeathofthespouse.
Annuity Plan Variants

24. .
ChoiceGovt SectorAll CitizenCorporate
CRAEmployer
Subscriber
(depends on PoP
integration with CRA)
Employer
(depends on PoPintegration
with CRA)
Point of PresenceNA -(Nodal Office)Subscriber Employer
Pension Funds-Default (03 Pension Funds)
-Subscriber (Any 01 out of 07)
Subscriber
(Any one -out of 07)
-Employer or
-Employer can delegate
the option to subscriber
Investment Choice-Default
-Subscriber (limited choice)
Subscriber
(Auto / Active)
-Employer or
-Employer can delegate
the option to subscriber
Annuity Service
ProviderSubscriber (Any one -out of 14)
Annuity PlanSubscriber (Any one available plan)
Selection of Options/Choices

25. Conditions
üSubscriber should be in NPS for 3 years
üAmount should not exceed 25% of the contributions made by the
subscriber
Purpose for which partial withdrawal allowed
üHigher education of his/her children
üMarriage of his/her children
üPurchase or construction of residential house or flat
üTreatment of specified illnesses
üDisabilityof more than 75%
üSkill development/re-skilling or any other self-development activities
üEstablishment of own venture or any start-ups
Frequency
üMaximum 3 (three) times during entire tenure
PARTIAL WITHDRAWALS

26. .
Vesting CriteriaBenefit
PREMATURE
Before 60 years or
superannuation age
•CompulsoryAnnuitisation-minimum80%
•Lumpsumwithdrawal-maximum20%
•IfCorpus<Rs.2.50Lac,completewithdrawalpermitted
NORMAL
On attaining 60 years or
superannuation (as per
service rules) and up to
75 years of age.
•Annuitisation-minimum40%
•Lumpsumwithdrawal-maximum60%
•IfCorpus<Rs.5.00Lac,completewithdrawalpermitted
•Optionofdefermentorcontinuanceupto75yearsofage
•Lumpsumdefermenttillageof75yearsandoptiontowithdrawinannual
instalments.
•Annuitypurchasedefermenttilltheageof75years.
•Exitanytimeduringcontinuance/deferment
Death due to any cause•Nomineewillreceive100%ofpensionwealthinlumpsum(private)
•Nomineecanalsopurchaseannuitywithaccumulatedpensionwealth.
EXIT –Joining 18-60 years

27. .EXIT –Joining After 60 years
Vesting CriteriaBenefit
PREMATURE
Before
completion of 3
years
•Annuitisation-minimum80%
•Lumpsumwithdrawal-maximum20%
•IfCorpus<Rs.2.50Lac,completewithdrawal
permitted
NORMAL
On completing 3
years and upto
75 years of age
•Annuitisation-minimum40%
•Lumpsumwithdrawal-maximum60%
•IfCorpus<Rs.5.00Lac,completewithdrawal
permitted
Death due to any
cause
•Nomineewillreceive100%oftheNPS
pensionwealthinlumpsum

28. SchemeSince Inception
Equity (E)13.16%-19.43%
Corporate Bonds (C)7.31 % -9.55%
Government Securities (G)7.78%-9.70%
Central Government Scheme
(CG) 9.41%
State Government Scheme (SG)9.31%
AtalPension Yojana(APY)9.00%
Scheme Returns –As on 26thApril 2024

29. Web portalMobile App
Online Facilities
§Accountaccessible24X7
§Generateaccountpassword
throughOTP
§ActivationofTier-IIAccount
§View/downloadStatementof
Transactions
§MakeContributions
§UpdateofContactDetails
§ChangePF/Schemepreferences
§InitiateWithdrawalsrequests
§SubmitGrievancesorescalatefor
redressal
Transparency

30. CREDITS
PFRDA website, NPST website, Outlook Money –Various articles of Investment Advisors from editions of Nov 2022, April 2023, July 2023 and April 2024

31. THANK YOU