The benefits of NPS are
Pension Funds are responsible for investing contributions, accumulating them and managing pension corpus through various schemes under National Pension System in accordance with the provisions of the PFRDA Act.
NPS offers you two approaches to invest in your account:
In Active choice, Subscriber selects the allocation percentage in assets classes,however, in Auto choice, funds are automatically allocated amongst asset classes in a pre-defined matrix, based on the age of the subscriber. After selection of pension fund manager, Subscriber also has to exercise the choice of investment.
Unlike traditional investment products, NPS offers you with the flexibility to design your own portfolio. Depending on your risk appetite, you can design your portfolio by allocating Funds amongst available four asset classes. This is called Active Choice. Following are the four asset classes are available under Active choice:
At times designing your portfolio can be a little delicate and time consuming. NPS gives you the flexibility to opt for a dynamic and automatic allocation of your portfolio in case you do not want to exercise an Active choice. This option is called the Auto choice.
In Auto choice, your money will be invested in asset classes - E, C and G - in defined proportions based on your age. As individual’s age increases, exposure to Equity and Corporate Debt is gradually reduced and that in Government Securities is increased. Depending upon the risk appetite of subscriber, there are three different options available within Auto Choice-Aggressive, Moderate and Conservative.
Following are the assets classes are available for investment for investment under NPS:
If you are a conservative investor, you can choose to invest your entire pension wealth in C or G asset class. However, if you want to have exposure to equity, you can allocate maximum 50% of your money to asset class 'E' or up to 5% in Alternative Investment Funds.
Scheme preference change is the option given to the Non-Government subscriber to design / redesign their own portfolio. It comprises change of Pension Fund Manager (PFMs), switching between Active choice and Auto choice and in case of Active choice to decide percentage of allocation in different asset classes.
A subscriber of Non-Government sector can change their Scheme Preference through their associated POP-SP. It can also be done online through their log-in credentials of CRA.
In NPS, there are multiple PFMs, Investment Options (Auto or Active) and four Asset Classes – Equity, Debt, Government Securities and Alternate Investment Funds. Subscriber has been given the flexibility to choose any one out of available Pension Fund Managers (PFMs) and investment options separately for Tier I and Tier II account.
Selection of Pension Fund Manager is mandatory while filling up the registration form. All the PFMs under NPS are registered and regulated by PFRDA. They are mandated to invest Subscriber's contribution as per prescribed guidelines and regulations by PFRDA.
You can find the performance of respective PFMs on NPS Trust website at http://www.npstrust.org.in/return-of-nps-scheme. Returns of different schemes under NPS may help you while selecting the PFM. In NPS, you are allowed to change PFM once in a financial year.
NPS provides you two types of accounts: Tier I and Tier II. Tier I is mandatory retirement account, whereas Tier II is a voluntary saving Account associated with your PRAN. Tier II offers greater flexibility in terms of withdrawal, unlike Tier I account, you can withdraw from your Tier II account at any point of time.
Below are few significant benefits of Tier II NPS Account:
Any subscriber who has an active Tier I account can activate a Tier II account
The contribution remitted in Subscriber's account is passed on to the PFMs as selected by the Subscriber at the time of registration (or changed subsequently). The PFMs invest the money and declare Net Asset Value (NAV) at the end of each business day. Accordingly, based on the NAV, units are credited in the Subscriber's account. The present value of the investment is arrived at by multiplying the units held with the NAV.
The return under NPS is market driven. Hence, there is no guaranteed/defined amount of return. The returns generated through investments are accumulated for the pension corpus and is not distributed by way of dividend or bonus.
Net Asset Value is also known as NAV. This is the price of one unit of a fund. NAV is calculated at the end of every working day. It is calculated by adding up the value of all the securities and cash in the fund's portfolio (its assets), subtracting the fund's liabilities, and dividing that number by the number of units that the fund has issued.
The NAV increases (or decreases) when the value of the fund's holdings increase (or decrease). NAV of schemes of different PFMs may differ. Even the different schemes under the same PFM will have different NAV.
No, there is no need to re-open NPS account when you change your Job or location. Portability is one of the key features of NPS, it can be operated from anywhere in the country irrespective of individual employment and location/geography.This implies that you can shift your PRAN from one sector to another, e.g. Central Government to Corporate sector, State Government to Central Government etc. and vice versa.Further, if you are relocated because of any reason, you can also change POP-SP within the same POP or you can change to POP of your choice available to the location.
You can find the list of POP/POP-SP of your location from the "Important Links" available on this website.