Atal Pension Yojana (APY)

If you are between 18-40 years, you and your spouse can avail the benefit of a minimum guaranteed pension at the age of 60 years by joining Atal Pension Yojana (APY) which is implemented through all banks in the country.

Benefits under APY:

Choice of guaranteed minimum pension between Rs.1000-5000 for the subscriber after the age of 60 years.

​ Govt. of India co-contributes* 50% of the total contribution or Rs. 1000 per annum, whichever is lower for 5 years who joins the scheme before 31st Dec, 2015.

Spouse gets the minimum guaranteed pension of Rs 1000-5000 after death of subscriber.

The nominee is paid with the indicative pension corpus of Rs 1.7 to 8.5 lakh after death of both subscriber and spouse

​The complete scheme details enclosed at the attachment.

To subscribe, please contact your Bank branch immediately. For further details, call 1800-110-069.

* Government co-contribution is available for those who are not covered under any Statutory Social Security Schemes and for non-income tax payee.

<< Click Here >>  to download FAQ released by NSDL.

NPS : Official amendments to PFRDA Bill 2011

Official amendments to the Pension Fund Regulatory and Development Authority Bill, 2011 

The Union Cabinet today approved the introduction of certain official amendments to the Pension Fund Regulatory and Development Authority Bill, 2011. These official amendments have been necessitated in view of the recommendations of the Standing Committee on Finance which has examined the Bill. Based on the recommendations of the Standing Committee on Finance, the Government has decided to accept the following: 

1. that the subscriber seeking minimum assured returns shall be allowed to opt for investing his funds in such schemes providing minimum assured returns as may be notified by the Authority; 

NPS

The interim pension regulator has sought tax relief on investments in the New Pension Scheme (NPS) to make it more attractive to employees of private sector firms.


The Pension Fund Regulatory and Development Authority (PFRDA) has written to the finance ministry seeking level playing field for NPS with other long-term savings schemes that will get tax benefits under the proposed Direct Taxes Code. “All we want is equal treatment,” a PFRDA official said.

NPS is currently under the Exempt-Exempt-Tax system, which means investment will be taxed when it is withdrawn. Provident fund and many of the small savings schemes are under the Exempt-Exempt-Exempt (EEE) regime, and are not taxed at any point.

“If the finance ministry plans to continue with the EEE regime for long-term saving schemes, we want the NPS also to get the same treatment,” the official said, requesting anonymity. “Several multinational companies are talking to us. We need more clarity on the tax treatment,” he said.

The pension regulator has, in its letter to the central board of direct taxes (CBDT), said tax benefits will make the scheme more attractive and will help increase its share.

While a few public sector units such as Nalco and Damodar Valley Corporation have already transferred a portion of their superannuation funds to the NPS, many private sector companies and public sector banks are also exploring the option as it would rid them of the headache of administering and managing the funds.

“This would be a good step. It would allow private companies to move their superannuation funds to the NPS,” said Amit Gopal, vice-president of pension consultant India Life Capital.

The PFRDA has further requested for an additional window under Section 80C of the Income Tax Act for contributions by subscribers’ employers.

Investments in specified schemes up to Rs 1 lakh are exempt under Section 80 C of the Income Tax Act. The budget for this year has given an additional exemption of Rs 20,000 for investments in infrastructure schemes.

Under Indian laws, companies with over 100 employees have to contribute 12% of an employee’s salary to the provident fund with an equal contribution from the employer.

The NPS, a defined contribution superannuation scheme for government employees, was thrown open to the private sector in May last year. The scheme offers subscribers the flexibility to decide their investment portfolio as well as choose between fund managers.

With weighted returns of over 12% annually, NPS is expected to be the ideal long-term saving instrument for workers in the unorganised sector. Its low fund management fees of 0.009% make it attractive.

The scheme, however, has managed only 6,500 private subscribers, partly because it does not enjoy some tax benefits given to private provident fund and private superannuation funds.

source : The Economic Times.

NPS

Parametric reforms of NPS merit consideration


The mandatory New Pension System (NPS) has been applicable for the Central government employees since 2004. It mandates a contribution of 10% each from the covered civil servants and from the government, as an employer. The contribution base is the full salary.
- The interim PFRDA (Pension Fund Regulatory and Development Authority) set up in 2003, has instituted a well-designed NPS architecture.
- The 13th Finance Commission, which submitted its report on February 25, 2010, reported that 23 states have adopted the NPS for their civil servants. The total amount currently at Rs 12500 million is expected to increase rapidly.
- While voluntary NPS for all Indian citizens with a minimum annual contribution of Rs 6,000 was made operational from May 2009, Swavlamban with a top-up of Rs 1,000 for members from the unorganised sector, is set to take off anytime now.
- Both the mandatory and voluntary NPS require accumulations till age 60, with no pre-retirement withdrawals, enabling compounding effect to benefit members.
- Recently, the interim PFRDA has raised the age of joining the NPS to 60 years from the previous 55 years.
- The NPS charges and fees for services of the points of presence (PoP) and for the central recordkeeping agency (CRA) are flat and fixed. Therefore, they adversely impact members with short period of accumulations.
- As an example, a member joining at the age of 59 contributing the minimum depositof Rs 500 pm and retiring at 60 would end up obtaining a negative 15.20% (annualised) return despite an assumed positive 10% growth by the pension fund due to a fixed cost of Rs780 in year one. However, as the balances grow, these charges become relatively less important.
- Thus, for the NPS members who are contributing only minimum amount required, raising the age of joining to 60, but leaving other design parameters unchanged,(and ignoringSwavlamban contributions), is likely to result in negligible returns under plausible assumptions.
- For those in the same age cohort contributing relatively large amounts annually to NPS (e.g. 2 lakh), it is the EET (Exempt at Investment, Exempt at Growth, and Taxed at withdrawals) which could result in negligible returns if the membership period is short. This is because whatever a member contributes between aged 57 - 59, is paid back at 60 as own taxable income.
- Raising the age for joining the NPS by the PFRDA provides an opportunity to seriously consider the following parametric reform for the pay-out phase for both the mandatory and voluntary NPS.
- It should be emphasised that these reforms should be considered as a package and not separately, though not all of them need to be introduced at the same time.
- First, the mandatory annuity requirement may be reconsidered. A phased-withdrawal program, under which a member does not join an insurance pool, but retains the annuity component (40%) of accumulated balances in a special interest-bearing account, or senior- citizen- bond may be a possibility.
- A member may be given options to withdraw principal plus interest every quarter for a period ranging from 10 to 20 years until the amount is exhausted. The bond could receive treatment similar to interest paid to senior citizens for fixed deposits.
- All members may choose this option up to a prescribed amount (e.g. Rs 10 lakh in 2010 prices). This would enable disciplined and stable withdrawal of funds over the period chosen.
- Alternatively, a member can opt to receive only interest / return as quarterly withdrawal in the initial period and withdraw accumulated balances in a phased manner at a later stage e.g. beginning at age 70.
- Under the phased withdrawal, there is no insurance pool, so a member retains the ownership of balances and therefore nominees benefit in the event of member’s death.
- PFRDA should encourage research and policy dialogue on phased withdrawal options appropriate for the NPS. This can also benefit micro-pension, and occupational pension plans.
- Second, the age of ‘retirement’ from NPS could be made more flexible. Thus a member may chose to partially withdraw the accumulated balances as lump-sum (60%); purchase mandatory annuity and, as proposed above, invest in a phased withdrawal plan, at any time between the age of 60 and 70. This will have several advantages.
- It will permit individuals to enter NPS even between ages of 55 and 60, and still have sufficient time to accumulate retirement funds.
- It will provide flexibility to individuals to choose the macroeconomic conditions, particularly the interest rate conditions, under which to purchase annuities, and participate in the proposed phased withdrawal program. For greater flexibility the age of withdrawal of lumpsum, and the purchase on annuity (and phased withdrawal program) could be separated. Thus, a person could withdraw lump-sum at age 60, but purchase the annuity anytime between 60 and 70 years.
- Flexibility in timing of annuity purchases will better enable suppliers of annuities and bonds, such as life insurance companies, to match their assets and liabilities; and help manage uncertainties in longevity trends.
- Third, the current EET treatment of NPS is disadvantageous to its growth compared with other instruments that are subject to EEE treatment. Thus, there is a strong case for exempting from income tax a reasonable proportion of accumulated NPS balances.
- As there is already a higher exemption level for senior citizens of Rs 240,000 currently, the two combined should enable even the middle class income earners to be exempt from income tax during old age. Simultaneously, the reported plans to harmonise EET treatment for other pension and provident fund plans in April 2011 should be implemented to minimise tax arbitrage.
- The above three parametric reforms in the mandatory and voluntary NPS will further strengthen the NPS design, and contribute to better retirement income security.
- They could also help in increasing NPS membership, which, to date, has been very disappointing with around 5,000 members, and meager balances of Rs 100 million.
- India’s current elderly population of about 105 million is projected to increase to 330 million by 2050.
- India’s demographic challenges arising from rapid ageing, and its need for fiscal consolidation (the current Greek crisis has lent greater urgency to this issue globally), strongly suggests that the PFRDA Bill be considered by the Parliament expeditiously; and parametric reforms of NPS suggested above be given urgent consideration.

NPS Returns 14.82%

Central Government Employees NPS gives 14.82% average returns :


Central government employees who joined as a part of the contributory New Pension Scheme (NPS) have earned a weighted average return of 14.82 per cent during 2008-09, the first year when three fund managers managed a corpus of around Rs 2,000 crore.

This has outperformed any another form of Investment like PF etc. Its a Win Win situation for both Govt as well as Employees.

This is in contrast to the annual 8 per cent returns between January 2004 and March 2008 when the government had not transferred the money to the three fund managers – SBI Pension Fund, UTI Retirement Solutions and LIC Pension Fund.

The Centre moved all employees joining from January 1, 2004 to NPS, where they have to chip in with a contribution of 10 per cent of their basic salary with a matching contribution made by the government. While the money was being deducted, it was parked in a government account and earned a fixed rate of return.

While the corpus will increase this year, partly due to higher contribution and also due to the release of some of the arrears following the implementation of the Sixth Pay Commission’s recommendations, the equity investment is also expected to go up.

At present, around 5 per cent of the corpus is invested in equities against the permissible limit of 15 per cent.

This year onwards, the fund management fee is also going to decrease to 0.0009 per cent (or 0.09 basis points), in line with the pension scheme for non-government employees, as against up to 5 basis points last year.

In addition, state governments are expected to join the scheme. While 21 states have shown their willingness to join NPS, none of them have started releasing the funds as some of them, unlike the Centre, are reluctant to bear the costs, such as those related to the record-keeping agency.

Launch of NPS

Coimbatore March 7, 2010 :
Commissioner of Customs, Central Excise and Service Tax, C. Rajendiran on Saturday launched the New Pension Scheme (NPS) through India Post as a Point of Presence (POP) wherein the Head Post Offices would initially market the scheme.
Launching the scheme, Mr. Rajendiran said that post offices were a bridge between people and Government departments. The Department would play a pivotal role in every one's life. “Change is a must for growth and post offices have changed over a period both in terms of appearance as well as services”.

He exhorted the postal staff to follow a corporate culture and be a trendsetter for others to emulate and pointed out that network and identity with the people was the strength of the department.

The Postmaster General, Mr. Rajarajan, said that the Department would act as a POP for extending the new pension scheme on behalf of the Pension Fund Regulatory and Development Authority (PFRDA).

The scheme was being made available through head post offices on an experimental basis in Coimbatore region of Tamil Nadu and Southern Region of Karnataka. In the first phase, 21 head post offices in the nine districts of Western Region namely Coimbatore, R.S. Puram, Dharmapuri, Krishnagiri, Erode, Bhavani, Gobichettipalayam, Namakkal, Tiruchengode, Udhagamandalam, Coonoor, Pollachi, Udumalpet, Salem, Aatur, Suramangalam, Tirupur, Dharapuram, Mettupalayam, Tirupattur and Gudiayattam will act as POP. The department would operationalise the NPS in terms of subscriber registration for opening new pension account, acceptance of forms, verification, processing and forwarding the forms to Central Record Agency-Facilitation Centre, initial contribution processing, regular subscriber contribution upload through Meghdoot Software, subscriber servicing, grievance handling and MIS uploading.

Any Indian citizen in the age group of 18 to 55 years could join and continue till 60years. Minimum contribution is Rs. 500 a month and Rs 6,000 per annum and there should be a minimum of four contributions. Account holders could decide on the frequency and extent of contribution across the year as per their grievance. Subscribers' contribution would be invested as per the scheme preference opted by the subscriber and options are low risk: low returns, moderate risk: moderate returns and high risk and high returns. The subscriber could opt for the options failing which the investment would be done in auto choice considering the age of the subscriber. The pension contribution would be invested in various schemes by any one of the seven pension fund managers appointed by PFRDA. The return on investments would be in the range of six to seven per cent.

Courtesy : The Hindu