Retirement planning is indeed the most critical part of financial planning, and for those who are not already covered by another pension scheme New Pension System (NPS) is a great option.
What is New Pension System (NPS)?
The NPS is a new voluntary contributory pension scheme introduced by the Central Government . Under the new pension system , individuals can open a personal retirement account and can accumulate a pension corpus during their work life to meet financial needs post retirement. These contributions would grow and accumulate over the years, depending on the returns earned on the investment made. When the person retires, he will be able to use these savings to take care of the needs and expenses of his family during old age. The subscribers may use the accumulated pension wealth under the scheme to purchase a life annuity from a life insurance company. Alternatively, depending on the age of the subscriber, a part of the wealth may be withdrawn as lump-sum. ICICI Securities Limited (I-Sec) has obtained the Point of Presence (POP) Registration Certificate from PFRDA to offer NPS accounts. Any individual customer of icicidirect.com desiring to open an NPS account can do so by clicking on “Subscribe NPS” and fulfilling the prerequisite process. The offer document containing details of the NPS for opening NPS account are available on the website of PFRDA (www.pfrda.org.in) as well as icicidirect.com.
The NPS is administered by Pension Fund Regulatory and Development Authority (PFRDA) and was introduced by the Government of India to provide sustainable solutions for adequate retirement income.
Under NPS, two types of accounts will be available –
1. Tier I account – You shall contribute your savings for retirement into this non-with draw able account. Tier I account is available online and you can apply by logging in to your ICICIdirect.com Account (Click “Subscribe NPS” link under the NPS section). You can also open the account by visiting the nearest store.
2. Tier II account – This is a voluntary savings facility. You will be free to withdraw your savings/redeem your Tier II units from this PRAN account whenever you wish. To open this account an active Tier I account is a prerequisite.
Key highlights of NPS are
- PFRDA has appointed following Pension Fund Managers (PFM) to invest and manage funds.
Pension Fund Managers (PFM)
1. ICICI Prudential Pension Funds Management Co. Limited2. SBI Pension Fund Pvt. Limited
3. UTI Retirement Solutions Limited
4. IDFC Pension Fund Management Co. Limited
5. Kotak Mahindra Pension Fund Limited
6. Reliance Capital Pension Fund Limited
- Minimum annual contribution to NPS (Tier 1) is Rs 6000 per annum and can be started with as low as Rs 500 (Minimum contribution amount)
- Low fund management charges of less that 0.01%
- Withdrawal on maturity at the age of 60 years post which one can withdraw 60% of the corpus as lumpsum or in trenches of minimum of 10% each and compulsorily buy annuities of the remaining 40%
- However, for special requirements a onetime withdrawal or liquidity of 20% is allowed before maturity
Why invest in NPS on ICICIdirect.com –
- Seamless and paperless subscription to NPS. Click here to know the account opening process
- You can start a SIP in NPS through ICICIdirect.com
- Currently Tier 1 type of accounts can be opened through ICICIdirect.com