Government Sector ( Central Government )
What is the role of PFRDA?
As per PFRDA Act 2013, PFRDA is an Authority to promote old age income security by establishing, regulating and developing pension funds to protect the interest of subscribers to schemes of pension funds and for matters connected therewith or incidental thereto.
What is ?
National Pension System” (NPS) means the contributory pension system whereby contributions from a subscriber are collected and accumulated in an individual pension account called PRAN using a system of points of presence, a central recordkeeping agency and pension funds as may be specified by regulations. The Central Government has introduced the Defined Contribution based Pension System known as the National Pension System (NPS) replacing the existing system of Defined Benefit Pension with effect from January 01, 2004 vide its notification Ministry of Finance (Department of Economic Affairs) OM No 5/7/2003 PR Dt 22/12/2003.
Who are covered by the NPS?
NPS is applicable to all employees joining services of Central Government including Central Autonomous Bodies (except Armed Forces) on or after 1st January 2004. Many State Governments have adopted NPS architecture and implemented NPS mandatorily through Gazette Notifications for their employees joining on or after a cut-off date.
How does NPS differ from old pension?
The old pension scheme of Government of India, referred as Defined Benefit Pension System (DBPS) is based on the last pay drawn of the employee. NPS is referred as Defined Contribution Pension System (DCPS) in which the employer & employee contributes for building a pension wealth payable at the time of retirement by way of annuity/ lumpsum withdrawal as per norms.
What is a PRAN ?
PRAN is an acronym for Permanent Retirement Account Number, which is the unique and portable number provided to each subscriber under NPS and remains with him throughout.
Are bank details mandatory for opening NPS account?
Yes. For subscribers, the Bank details are mandatory. In case, Bank details are not available at the time of filling the form, subscriber can provide a declaration for providing the Bank details within six months or on opening of Bank account whichever is earlier.
Can PRAN be generated in case of employees who expired/ left the organization?
Retrospective registration of subscribers is not permitted under NPS.
Can a subscriber use the same PRAN if he shifts from one sector to another/Central Govt to State Govt/Private to Govt etc. ?
As PRAN is unique and portable across employment & location, NPS contributions can be transferred by the prospective employer to same PRAN already allotted by previous employers after completion of Inter-Sector Shifting (ISS), if required.
Can a subscriber obtain/ use more than one PRAN?
No, an individual is permitted to have only one PRAN which is unique, permanent and portable across jobs/employments and locations. If a subscriber possesses more than one PRAN by any chance, the concerned Nodal office can deactivate the duplicated PRAN by initiating a request with CRA.
Who can be a nominee and how are the details to be filled in the form?
Only an individual can become a nominee. Subscriber can nominate a maximum of three nominees and a subscriber cannot fill the same nominee details more than once. Decimals/fractional values are not accepted in the nomination(s). Sum of percentage share across all the nominees must be equal to 100. If sum of percentage is not equal to 100, entire nomination will be rejected. If a nominee is a minor, then nominee’s date of birth and guardian details shall be mandatory. The registration of nominee details will not be done unless all details are duly filled up in the form. A subscriber may refer the instructions for nominations available in the registration form (S1 Form)
What is IRA compliance? What are the advantages & benefits of IRA compliance?
IRA complied subscribers are those who have submitted (S1 Form)and whose address, photograph and signature (i.e. complete KYC details) are maintained in CRA system. Advantages & Benefits of IRA Compliance to Subscribers:
1. PRAN cards are issued to all IRA compliant subscribers.
2. Subscriber can check their account balance online using I-PIN.
3. Subscriber can lodge a complaint against any entity using I-PIN.
4. Subscriber can access CRA toll free helpline using T-PIN.
5. No proof of identity and address is required during activation of Tier II account.
6. Value Added Services like online email alerts, SMS alerts etc.
What one should do if there are changes in PRAN data?
Subscriber can update his / her details in Tier I in CRA system by submitting a change request Form S2 to the concerned office to which the subscriber is linked.
What are the roles of Principal Account Office (for CG) Directorate of Treasury & Accounts (for SG) under NPS?
The Principal Accounts Office (PrAO)/ Directorate of Treasury & Accounts (DTA) act as the oversight authority in NPS monitoring. As per the standard operating procedure for NPS, the PrAO/DTA is required to discharge several functions, most of which are in the nature of monitoring performance of the registered nodal offices under its jurisdiction. The nature of activities required to be carried out by the PrAO/DTA may be summarized as under:
1. Consolidate PAO/DTO/ Nodal Office registration form and forward it to CRA for registration.
2. Monitor the performance of PAO/DDO/DTO/ Nodal offices in discharging their responsibilities in CRA system.
3. Monitor the resolution of grievances raised against PAO/DTO/ Nodal office
4. Take necessary action to ensure compliance of PAO/DDO/DTO with the operational procedure of CRA system
Is NPS applicable to employees of Central Autonomous Bodies?
Yes. In line with the decision of GOI to introduce NPS for new entrants joining central government services on or after 1/1/2004, it has been decided vide OM 1(13)/EV/2001 Dt 13/11/2003 Department of Expenditure, Ministry of Finance that all new entrants in all Autonomous Bodies under various Central Ministries/Departments recruited on or after 1/1/2004 will also be governed by the NPS.
How can the Central Autonomous Bodies join NPS?
Department of Expenditure, Ministry of Finance , GOI vide its OM No 1(13)/EV/2008 Dt 30/1/2009 advised all Central Autonomous Bodies to submit Letter of Consent (LOC) indicating their formal commitment towards discharging their obligations under NPS through the Financial Advisors of the respective Ministries/ Departments.
Is transition from contributory Provident Fund to Defined Contribution Pension Scheme permitted for the employees of Autonomous Bodies? What will be the date of effect in case of transition from CPF to NPS in case of employees who joined prior to 01.01.2004? What are the salient features of this scheme?
Yes. The organizations are permitted to shift to NPS in respect of employees who have joined before 1/1/2004 vide OM dt 30/6/2009 No 1(2)/EV/2007 Department Of Expenditure Ministry of Finance. Date of effect will be the date when such option is exercised by the concerned employee.
The other detailed operational features are as follows,
a. The existing corpus of CPF (both employees and employers’) would be moved over to the trust fund accounts under NPS.
b. In order to facilitate the transition from CPF to NPS, the autonomous body would make in addition one time ex gratia payment of 10% of the employer’s contribution for each of the employees opting to switch over to NPS.
c. Recurring monthly contribution by employee @ 10% of Basic Pay + DA and a matching contribution by the autonomous body would be payable.
d. The employer’s contribution would be payable from the month the organization/employee shifts over to NPS and would be limited to 10% of Basic Pay + DA.
Is NPS applicable to employees of State Autonomous Bodies?
Many State Governments have adopted NPS architecture and implemented NPS for the employees of State Government as well as for the employees of Autonomous bodies, State PSUs, Corporations, Boards, if notified in their respective gazette notifications.
Is NPS applicable to Members of All India Service joining the All India Services on or after 1/1/2004 ?
Yes and contribution to NPS would be mandatory for all members of All India Services joining the service on or after 1/1/2004 as specified in No 25014/14/2001- AIS II Dt 8/9/2009 issued by Ministry of Personnel, Public Grievances and Pensions.
Accounts & Upload
What is Tier I and Tier II account? Are they different?
Under NPS, two types of account would be available to subscribers i.e., Tier I & Tier II;
Tier I account – where a subscriber contributes his / her savings for retirement into a non-withdrawable account, and a Tier II account – a voluntary savings account from which subscribers are free to withdraw the savings whenever he/she wishes. An active Tier I account along with PRAN is a pre requisite for opening of a Tier II. Furthermore, since Tier II is a voluntary savings account, the government does not contribute any amount into Tier II account.
How much can a subscriber contribute towards his Tier I account?
A subscriber contributes 10% of his Salary +DA into his Tier-I (pension) account on a mandatory basis every month which is invested along with the matching contribution from the employer.
How can one open a Tier II account?
An active Tier I account along with PRAN is a pre requisite for opening of a Tier II. Any government employee who has an active Tier I account can approach any POP-SP for activation of Tier II account along with a copy PAN.
Investment Guidelines & Tax
How much can a subscriber contribute towards his Tier I account?
A subscriber contributes 10% of his Basic Salary +DA into his Tier-I (pension) account on a mandatory basis every month which is invested along with the matching contribution from the employer
What are the assets permitted for NPS funds investment of Government employees?
At present, there is only one default scheme for Tier I for Government employees. In the default scheme, the contribution is allocated to three PFMs, viz. SBI Pension Funds Private Limited, UTI Retirement Solutions Limited and LIC Pension Fund Limited and each of the PFMs will invest the funds in the proportion of upto 55% in Government securities, upto 40% in Debt securities, upto 15% in Equity and upto 5% in Money Market instruments. Refer to Govt. of India notification No.: F.No.5 (88)/ 2006-PR dated 14-08-2008 & Circular No. PFRDA/2014/2/PFM/1 dated 29th January 2014. 24.
Is there any timelines on upload of SCF and remittance of funds?
The timelines are specified in OM No 1 (7) 2003 / TA / Partfile/ 279 Dt 2/9/2008 issued by Department of Expenditure, Office of CGA, Ministry of Finance; applicable to Civil Ministries only.
Are there any tax benefits on NPS contributions for the central government employees?
Income Tax Act allows benefits under NPS as per the following sections,
Section 80CCE provides that the aggregate amount of deduction under Section 80CCC and 80CCD shall not exceed Rs 1 lakh. The Finance Act, 2011 provides that contribution made by the Central Government or any other employer to NPS shall be excluded while computing the limit of Rs 1,00,000. The contribution by the employee to the NPS will be subject to the limit of Rs 1,00,000.
Section CCD (2) provides that deduction in respect of contributions by the Central Government or any other employer to NPS available under Section 80CCD (2) will not be subject to the limit specified in Section 80CCE but it is subject to 10% of Basic + DA maximum.
The tax benefits are available only in the case of Tier I account not in Tier II account.
How does a subscriber register his grievances/ complaints?
A subscriber can contact the PAO/ DTO through his DDO, for resolving his/her grievance, if against the PAO/ DTO. In case grievance pertains to other intermediaries, PAO will lodge the grievance on behalf of subscriber in CGMS. Subscriber can also raise the grievance/complaint through Call Centre using T-PIN or through CRA website using I-PIN. A subscriber can also send a duly filled G1 form to CRA for lodging a grievance or may write to Grievance Redressal Cell, PFRDA, 1st Floor, ICADR Building, Vasant Kunj Institutional Area, Ph II New Delhi 70 (Email: firstname.lastname@example.org) for taking appropriate action. Subscriber can check the status of the grievance in CRA website at https://cransdl.com/CRA/grievanceStatusLim.do.
Exit, Withdrawal and Annuity
When and how can a subscriber withdraw the amount from Tier I account?
As per the guidelines for withdrawal stipulated by Pension Fund Regulatory & Development Authority (PFRDA)/Ministry of Finance(MOF), the subscribers can exit form New Pension System (NPS) on his / her retirement, resignation or death.
a) Upon Normal Superannuation: At least 40% of the accumulated pension wealth of the subscriber needs to be utilized for purchase of annuity providing for monthly pension to the subscriber and balance is paid as lump sum payment to the subscriber. However, the subscriber may opt for withdrawal of total pension wealth if it is less than 2 lacs.
b) Upon Death: The entire accumulated pension wealth (100%) would be paid to the nominee/legal heir of the subscriber and there would not be any purchase of annuity/monthly pension.
c) Exit from NPS before the age of Normal superannuation (irrespective of cause): At least 80% of the accumulated pension wealth of the subscriber needs to be utilized for purchase of annuity providing for monthly pension to the subscriber and the balance is paid as a lump sum payment to the subscriber It is clarified that the component for annuitisation doesn’t attract any tax whereas the lumsum withdrawal does have tax deductions as per applicable tax laws
What is annuity? Who is the Annuity Service Provider? What are the ASPs appointed by PFRDA?
Annuity in the context of NPS refers to the monthly payment that will be received by the subscriber from the Annuity Service Provider after his exit from NPS. Annuity Service Provider is an IRDA registered insurance company empanelled by PFRDA for providing of Annuity Services to NPS subscribers upon their exit from the system. ASPs will be responsible for managing the funds (allocated for buying annuity) and payment of the pension after a subscriber attains the age of 60. Pension Fund Regulatory and Development Authority (PFRDA) has empanelled the following seven IRDA approved life insurance companies for providing annuity services to the subscribers of National Pension System (NPS).
Life Insurance Corporation of India
SBI Life Insurance Co. Ltd.
ICICI Prudential Life Insurance Co. Ltd.
Bajaj Allianz Life Insurance Co. Ltd.
Star Union Dai-ichi Life Insurance Co. Ltd.
Reliance Life Insurance Co. Ltd.
HDFC Standard life insurance co ltd
Is there a default ASP under PFRDA?
The default ASP for NPS is LIC of India.
How do I redeem from Tier II account?
In order to withdraw from Tier II account, the subscriber needs to submit a duly filled UOS-S12 to the associated POP-SP. On T+3 days, (T being the date of processing) the funds are transferred from the Trustee Bank to subscriber’s bank account as registered in the CRA system and the onus of tax payment on the withdrawal lies with the subscriber since NPS system does not deduct any tax at source.